Shrewsbury Inc. reported the following results from last year's operations: At the beginning of this year, the company has a $800,000 investment opportunity with the following characteristics:
The company's minimum required rate of return is 14%.
If the company pursues the investment opportunity, this year's combined residual income for the entire company will be closest to:
A) $23,200
B) ($44,000)
C) $628,000
D) $652,800

Question

Shrewsbury Inc. reported the following results from last year's operations:  At the beginning of this year, the company has a $800,000 investment opportunity with the following characteristics:
 The company's minimum required rate of return is 14%.
If the company pursues the investment opportunity, this year's combined residual income for the entire company will be closest to:
A) $23,200 
B) ($44,000) 
C) $628,000 
D) $652,800

Quizplus · Accepted Answer

11eacbfc_c51e_5de0_8ffe_1dbad30f7f37_TB7552_00 Net operating income = $504,000 + $124,000 = $628,000
Average operating assets = $4,000,000 + $800,000 = $4,800,000
 11eacbfc_c51e_5de1_8ffe_c992dc1692ea_TB7552_00