Precious Metals Pty Ltd earned residual income of $70 000 during the year. The net profit was $250 000 during the year and the required return was 15 per cent. What was the invested capital?

Question

Quizplus · Accepted Answer

Residual income is calculated as Net Profit - (Invested Capital * Required Return). Given that Residual Income = $70,000, Net Profit = $250,000, and Required Return = 15%, we can set up the equation $70,000 = $250,000 - (Invested Capital * 15%). Solving for Invested Capital gives us $1,200,000.

Precious Metals Pty Ltd Earned Residual Income of $70 000