Question

Supply the missing data

Sales: 4.5mil
NOI: [blank]
Average operating assets: 1.8mil
ROI [blank]
Percentage: 15%
Dollar amount: [blank]
Residual income: 90k

Answer 1

To fill in the missing data, we can use the provided information along with the formulas for Return on Investment (ROI) and Residual Income (RI).

1. **Calculate NOI (Net Operating Income):**
- The formula for ROI is as follows:
\[
\text{ROI} = \frac{\text{NOI}}{\text{Average Operating Assets}}
\]
- Rearranging the formula to solve for NOI gives:
\[
\text{NOI} = \text{ROI} \times \text{Average Operating Assets}
\]

Given that the percentage (which we can assume is the ROI) is 15% (or 0.15 as a decimal) and Average Operating Assets is \$1.8 million, we can calculate NOI:
\[
\text{NOI} = 0.15 \times 1,800,000 = 270,000
\]

2. **Now calculate ROI (already known):**
- Since we already calculated ROI as 15%, this stays as is.

3. **Calculate Dollar Amount:**
- The dollar amount can be thought of as the total profit (which would be the NOI).
- Since we calculated NOI as \$270,000, this will be the dollar amount in this context.

Therefore, we can fill in the missing data as follows:

- **NOI:** \$270,000
- **ROI:** 15%
- **Dollar Amount:** \$270,000

Note:
- Overall, the Residual Income (RI) of \$90,000 can be verified using the formula:
\[
\text{Residual Income} = \text{NOI} - (\text{Required Return} \times \text{Average Operating Assets})
\]
To find the Required Return, rearranging the formula gives us:
\[
\text{Required Return} = \frac{\text{NOI} - \text{Residual Income}}{\text{Average Operating Assets}}
\]
\[
\text{Required Return} = \frac{270,000 - 90,000}{1,800,000} = \frac{180,000}{1,800,000} = 0.1 \text{ or } 10\%
\]
This shows that a required return of 10% was used to calculate the residual income.

In summary:

- **Sales:** $4.5 million
- **NOI:** $270,000
- **Average Operating Assets:** $1.8 million
- **ROI:** 15%
- **Dollar Amount:** $270,000
- **Residual Income:** $90,000