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30 November, 22:08

Barrington Corporation reports the following information.

2017 2016

Cash $15,960 $14,490

Net operating working capital $6,150 $3,300

Net long-term operating assets $9,360 $9,300

Net nonoperating obligations $2,700 $2,100

Net operating profit after tax $1,950 $1,620

Weighted average cost of capital 7.0% 7.0%

a. What is the company's residual operating income (ROPI) for 2017?

Select one:

A. $ 864

B. $1,068

C. $1,215

D. $ 988

E. None of the above

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Answers (1)
  1. 1 December, 00:46
    0
    Option (B) is correct.

    Explanation:

    Net operating assets (Beginning):

    = Net operating working capital + Net long-term operating assets

    = $3,300 + $9,300

    = $12,600

    Company's residual operating income (ROPI) for 2017:

    = Net operating profit after tax - [Net operating assets (Beginning) * Weighted average cost of capital]

    = $1,950 - [$12,600 * 7.0%]

    = $1,950 - $882

    = $1,068
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