When computing Residual Income, it is not correct to eliminate non-productive assets in the calculation.

Question

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Residual Income is calculated to assess the net operating income earned above the minimum required return on its operating assets. Non-productive assets, which do not contribute to operating income, are typically excluded from the calculation to provide a more accurate measure of the profitability and efficiency of the productive assets.

When Computing Residual Income, It Is Not Correct to Eliminate