A company's current net operating income is $24,500 and its - 17163

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Request Description

A company's current net operating income is $24,500 and its average operating assets are $109,000. The company's required rate of return is 18%. A new project being considered would require an investment of $20,700 and would generate annual net operating income of $5,600. What is the residual income of the new project?
 
$5,600
 
$1,874
 
($1,190)
 
$3,726
                                       

Solution Description

 

A company's current net operating income is $24,500 and its average operating assets are $109,000. The company's required rate of return is 18%. A new project being considered would require an investment of $20,700 and would generate annual net operating income of $5,600. What is the residual income of the new project?