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    Residual income

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    The Hum Division of the Ho Company reported the following data for last year:

    Sales $800,000
    Operating expenses $650,000
    Interest expense $50,000
    Tax expense $30,000
    Stockholders' equity $200,000
    Average operating assets $600,000
    Minimum required rate of return 12%

    9(b). The residual income for the Hum Division last year was:

    9(c). The return on investment last year for the Hum Division was:

    *Please see attachment for file table.

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    Practice Problem 9

    The Hum Division of the Ho Company reported the following data for last year:

    Sales $800,000
    Operating expenses $650,000
    Interest expense $50,000
    Tax expense $30,000
    Stockholders' equity $200,000
    Average operating assets $600,000
    Minimum required rate of ...

    Solution Summary

    This gives the steps to compute the residual income

    $2.19

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