Financial data for Beaker Company for last year appear below:
Beaker Company
Statements of Financial Position
Balance Balance
Assets:
Cash…………………………….. $50000 $70000
Accounts receivable……………. 20000 25000
Inventory……………………….. 30000 35000
Plant & Equipment (net)……….. 120000 110000
Investment in Cedar Company…. 80000 100000
Land (undeveloped)……………. 170000 170000
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Total Assets…………………….. $470000 $510000
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Liabilities and owners’ equity:
Accounts payable……………….. $70000 $90000
Long term debt…………………. 250000 250000
Owners’ equity………………….. 150000 170000
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Total Liabilities and owners’ equity $470000 $510000
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Income Statement
Sales……………………………. $414000
Less operating expenses……….. 351900
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Net operating income………….. $62100
Less interest and taxes:
Interest expense…………….. $30000
Tax expense…………………. 10000 40000
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Net income……………………. $22100
The company paid dividends of $2,100 last year. The “”Investment in Cedar Company”” on the statement of financial position represents an investment in the stock of another company.
Required: a. Compute the company’s margin, turnover, and return on investment for last year.
b. The Board of Directors of Beaker Company has set a minimum required return of 20%. What was the company’s residual income last year?