(a)
Return on investment ( Net income/ Assets)
|
Net
Income |
Assets |
Return on investment (
Net income/ Assets) |
| Las Vegas |
$1,310,000 |
$4,000,000 |
1,310,000/4,000,000 = 33% |
| Dallas |
1,550,000 |
8,000,000 |
1,550,000/8,000,000 = 19% |
| Tampa |
2,390,000 |
12,000,000 |
2,390,000/12,000,000 = 20% |
|
Return on investment |
Rank |
| Las Vegas |
33% |
1 |
| Dallas |
19% |
3 |
| Tampa |
20% |
2 |
(b)
Required rate of return = 5%
Residual income = Net Income - ( Assets x Required rate of
return)
|
Net
Income |
Assets |
Residual income = Net
Income - ( Assets x Required rate of return) |
| Las Vegas |
$1,310,000 |
$4,000,000 |
1,310,000- (4,000,000 x 5%)=
1,110,000 |
| Dallas |
1,550,000 |
8,000,000 |
1,550,000- (8,000,000 x 5%)=
1,150,000 |
| Tampa |
2,390,000 |
12,000,000 |
2,390,000 - (12,000,000 x 5%)=
1,790,000 |
|
Residual
income |
Rank |
| Las Vegas |
1,110,000 |
3 |
| Dallas |
1,150,000 |
2 |
| Tampa |
1,790,000 |
1 |
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