If profit before tax is $320 000,required rate of return is 15% and the investment is $1 900 000 the residual income calculation is:
A)$1 650 000.
B)$35 000.
C)13.2%.
D)$2 150 000.

Question

Quizplus · Accepted Answer

Residual income is calculated as profit before tax minus the product of the required rate of return and the investment. Here, it is $320,000 - (15% of $1,900,000) = $320,000 - $285,000 = $35,000.

If Profit Before Tax Is $320 000,required Rate of Return