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What is the residual income(loss) if a company has sales of $205,000, cost of goods sold of $115,000, operating expenses of $40,000, average invested assets of $915,000, and hurdle rate of 12.75 percent?

What is the residual incomeloss if a company has sales of 205000 cost of goods sold of 115000 operating expenses of 40000 average invested assets of 915000 and class=

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Answer:

Following are the solution to this question:

Explanation:

value                                                                                   Amount

Sale                                                                                 [tex]\$ 205,000[/tex]                                  

The less cost of product sol                                                [tex]\$115,000[/tex]

The less operate expenses                                                [tex]\$40,000[/tex]

Earning                         [tex]= \$205,000- \$115,000 - \$40,000 = \$ 50,000[/tex]

Average funds invested                                                 [tex]\$915,000[/tex]

Investment return                                     [tex]= \frac{ \$50,000}{\$915,000} \times 100 = 5.464 \%[/tex]

Required Income                             [tex]= \$ 915,000\times 12.75\% = \$ 116,662.5[/tex]

Residual Income (Loss) [tex]= \$50,000 - \$116,662.5 = (\$66,662.5)[/tex]

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