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1) A project that cost $90000 has a useful life of 5 years and a salvage value of $3000
1) A project that cost $90000 has a useful life of 5 years and a salvage value of $3000. The internal rate of return is 12% and the annual rate of return is 18%. The amount of the annual net income is
2) Required information Selected sales and operating data for Division A of McAllister Structural Engineers is presented below:
Division A Sales $24,000,000 Average operating assets $3,000,000 Net operating income $480,000 Minimum required rate of return 14%
Compute the residual income for Division A.
Expert Solution
1)
Computation of Annual Net Income:
Annual Rate of Return = Annual Net Income/Average Investment
18% = Annual Net Income/(($90,000+$3,000)/2)
18% = Annual Net Income / $46,500
Annual Net Income = 18%*$46,500 = $8,370
2)
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