What Is the Residual Income for a Firm with $1

question 16

Multiple Choice

What is the residual income for a firm with $1 million in total capital, $300,000 in net income, and a 20% cost of capital?

• A)$400,000
• B)$300,000
• C)$200,000
• D)$100,000 Total capital x cost of capital
• $1 million x .2 = $200,000
• Residual income = Net Income - Cost of Capital

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Definitions:

Ingratiating

An attempt to increase one’s attractiveness to others to influence their behavior

Self-promotion

The act of advocating for oneself to advance personal goals, often involving highlighting one's achievements and capabilities to others.

Organizational Citizen

An employee who goes beyond the required duties of their position to contribute positively to the organization's culture and functioning.

Valuable Reward

A reward of significant worth or importance, often given in recognition of an individual's effort or achievement.