Question

if average operating assets are $200,000, the turnover is 2.0, the return on investment (roi) is 30%, and the residual income is $40,000, then the minimum required rate of return on average operating assets is closest to: multiple choice 16%. 15%. 12%. 10%.

Answer 1

The minimum required rate of return on average operating assets equals to 20%.

What is a rate of return?

In finance, the rate of return refers to the gain or loss of an investment over a specified period of time, as expressed as a percentage of the investment's cost. The minimum required rate of return on average operating assets equals to the net operating income divided by average operating assets times 100.

The computation of the minimum required rate of return on average operating assets goes as thus:

= Net Operating income / Average operating asset

= $40,000 / $200,000

= 0.2

= 20%.

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