Which of the following is the correct formula for calculating residual income?
A) Weighted average cost of capital - Net operating profit after tax
B) Operating income - Minimum acceptable operating income
C) Historical cost of assets - Accumulated depreciation
D) Operating income / Average assets

Question

Quizplus · Accepted Answer

Residual income is calculated by subtracting the minimum acceptable operating income (or a cost of capital charge) from the operating income. This measures the excess income generated above the minimum required return.

Which of the Following Is the Correct Formula for Calculating