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2 July, 20:02

A segment of a company with an ROI of 25% has an income of $84,000. The company's required rate of return on segment investments is 18%. The segment's residual income is: A. $14,280 B. $33,600 C. $21,000 D. $23,520

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  1. 2 July, 22:26
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    D. $23,520

    Explanation:

    The cost of investment in the segment shall be determined from the ROI formula in the following mentioned manner:

    ROI=Net profit/cost of investment

    25%=$84,000/Cost of investment

    Cost of investment=$336,000

    The residual income of the segment of any company is determined through following mentioned formula:

    Residual income=Net income - (required rate of return*cost of investment)

    Residual income=$84,000 - (18%*$336,000)

    =$23,520

    So based on the above calculations, the answer is D. $23,520
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Home » Business » A segment of a company with an ROI of 25% has an income of $84,000. The company's required rate of return on segment investments is 18%. The segment's residual income is: A. $14,280 B. $33,600 C. $21,000 D. $23,520
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