FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Question
Residual income is the excess of operating income over the cost of capital
associated with the deployed assets. Following is information for four
segments. Experiment with alternative rates of the cost of capital by using
the pick list choices associated with the boxed area. Note how the relative
residual income changes between the units based on the interest rate
assumption!
What do you wish to assume for the interest rate? >>>> 0%
Segment A Segment B Segment C Segment D
Operating income $ 1,200,000 $ 1,000,000 $ 750,000 $ 500,000
Operating assets $ 8,000,000 $ 4,000,000 $ 2,000,000 $ 600,000
Assumed interest rate X 0 X 0 X 0 X 0
Cost of Capital $ - $ - $ - $ -
Residual income $ 1,200,000 $ 1,000,000 $ 750,000 $ 500,000
 
What would be the Residual Income of Segment A?
 
 
 
 
Flag question: Question 2
Question 21 pts

What would be the Return on Asset (ROA) of Segment A in percentage?

Note: To get a proper grade, for example, enter 0.35 if the ROA is 35%

 
 
 
 
Flag question: Question 3
Question 31 pts
What would be the Residual Income of Segment B?
 
 
 
 
Flag question: Question 4
Question 41 pts

What would be the Return on Asset (ROA) of Segment B in percentage?

Note: To get a proper grade, for example, enter 0.35 if the ROA is 35%

 
 
 
 
Flag question: Question 5
Question 51 pts
What would be the Residual Income of Segment C?
 
 
 
 
Flag question: Question 6
Question 61 pts

What would be the Return on Asset (ROA) of Segment C in percentage?

Note: To get a proper grade, for example, enter 0.35 if the ROA is 35%

 
 
 
 
Flag question: Question 7
Question 71 pts
What would be the Residual Income of Segment D?
 
 
 
 
Flag question: Question 8
Question 81 pts

What would be the Return on Asset (ROA) of Segment D in percentage?

Note: To get a proper grade, for example, enter 0.35 if the ROA is 35%

 
 
 
 
Flag question: Question 9
Question 91 pts
If the company decides to give a bonus to managers based on Residual Income, which Segment's manager will get the bonus?
Group of answer choices
Segment D
Segment C
Segment B
Segment A
 
 
 
Flag question: Question 10
Question 101 pts
If the company decides to give a bonus to managers based on ROA, which Segment's manager will get the bonus?
Group of answer choices
Segment A
Segment B
Segment D
Segment C
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