For the period just ended, Techno Corporation's Stocker Division reported profit of $54 million and invested capital of $450 million. Assuming an imputed interest rate of 10%, which of the following choices correctly denotes Stocker's return on investment (ROI) and residual income? $$\begin{array}{l}
\begin{array} { l l l }
& \text { ROI } & \text { Residual Income } \
\text { A. } & 12.0 \% & \$ 9 \text { million } \
\text { B. } & 12.0 \% & \$ ( 9 \text { million } ) \
\text { C. } & 10.0 \% & \$ 9 \text { million } \
\text { D. } & \$ 9 \text { million } & 12 \%
\end{array}\
\text { E. } \quad \text { None of the other answers are correct. }
\end{array}$$

Question

For the period just ended, Techno Corporation's Stocker Division reported profit of $54 million and invested capital of $450 million. Assuming an imputed interest rate of 10%, which of the following choices correctly denotes Stocker's return on investment (ROI) and residual income? $$\begin{array}{l}
\begin{array} { l l l } 
& \text { ROI } & \text { Residual Income } \
\text { A. } & 12.0 \% & \$ 9 \text { million } \
\text { B. } & 12.0 \% & \$ ( 9 \text { million } ) \
\text { C. } & 10.0 \% & \$ 9 \text { million } \
\text { D. } & \$ 9 \text { million } & 12 \%
\end{array}\
\text { E. } \quad \text { None of the other answers are correct. }
\end{array}$$

Quizplus · Accepted Answer

ROI is calculated as (Profit / Invested Capital) = ($54 million / $450 million) = 12.0%. Residual Income is calculated as (Profit - (Invested Capital * Imputed Interest Rate)) = $54 million - ($450 million * 10%) = $54 million - $45 million = $9 million.

For the Period Just Ended, Techno Corporation's Stocker Division Reported