Required 1. Check your worksheet by changing the average operating assets in cell B6 to $8,000,000. The ROI should now be 38% and the residual income should now be $1,000,000. If you do not get these answers, find the errors in your worksheet and correct them. Explain why the ROI and the residual income both increase when the average operating assets decrease. 2. Revise the data in your worksheet as follows: Data Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,200 Net operating income . . . . . . . . . . . . . . $72 Average operating assets . . . . . . . . . . . $500 Minimum required rate of return . . . . . . 15% a. What is the ROI? b. What is the residual income? c. Explain the relationship between the ROI and the residual income?

qattachments_dd686755b7d3b3122ab0ade1d71dcd79f9c9e252.xls Chapter 11: Applying Excel Data Sales Net operating income Average operating assets Minimum required rate of return $25,000,000 $3,000,000 $10,000,000 25% Enter a formula into each of the cells marked with a ? below Review Problem: Return on Investment (ROI) and Residual Income Compute the ROI Margin Turnover ROI ? ? ? Compute the residual income Average operating assets Net operating income Minimum required return Residual income ? ? ? ? Required 1. Check your worksheet by changing the average operating assets in cell B6 to $8,000,000. The ROI should now be 38% and the residual income should now be $1,000,000. If you do not get these answers, find the errors in your worksheet and correct them. Explain why the ROI and the residual income both increase when the average operating assets decrease. 2. Revise the data in your worksheet as follows: Data Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,200 Net operating income . . . . . . . . . . . . . . $72 Average operating assets . . . . . . . . . . . $500 Minimum required rate of return . . . . . . 15% a. What is the ROI? b. What is the residual income? c. Explain the relationship between the ROI and the residual income