If profit before tax is $210 000,required rate of return is 12% and the investment is $1 400 000,the residual income calculation is:
A) 15%
B) $168 000
C) $42 000
D) $1 190 000

Question

Quizplus · Accepted Answer

Residual income is calculated as the profit before tax minus the product of the required rate of return and the investment. Here, it is $210,000 - (12% of $1,400,000) = $210,000 - $168,000 = $42,000.

If Profit Before Tax Is $210 000,required Rate of Return