Payne Company Reported the Following Information for the Current Year

question 132

Multiple Choice

Payne Company reported the following information for the current year: $\begin{array}{llr} \text {Sales } &\$910,000\\ \text { Average operating assets} &\$410,000\\ \text { Desired ROI } &14\%\\ \text { Operating income } &\$61,000\end{array}$
The company's residual income was:

• A) $9,000.
• B) $57,400.
• C) $3,600.
• D) $12,600.

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Definitions:

Market Average

A statistical measure that represents the overall market or a specific segment of it, commonly used to track market performance.

Return

The profit or deficit experienced on an investment during a given period, represented as a percentage of the original investment's value.

Security Market Line

A line that represents the relationship between the risk of an investment and its expected return, used in the capital asset pricing model.

Market Risk Premium

The additional return expected by investors for taking on the higher risk of investing in the stock market over a risk-free rate.