Reference no: EM131711567

Question - Financial data for Redstone Company for last year appear below:

Redstone Company

Statements of Financial Position   Beginning Balance Ending Balance Assets:         Cash $ 341,000 $ 336,590 Accounts receivable   188,000   192,000 Inventory   260,000   251,000 Plant and equipment (net)   448,000   385,000 Investment in Balsam Company   315,000   257,000 Land (undeveloped)   301,000   301,000 Total assets $ 1,853,000 $ 1,722,590           Liabilities and owners' equity:         Accounts payable $ 203,000 $ 206,000 Long-term debt   892,000   892,000 Owners' equity   758,000   624,590 Total liabilities and owners' equity $ 1,853,000 $ 1,722,590 

Redstone Company

Income statement Sales     $ 2,350,000 Less operating expenses       2,103,250 Net operating income       246,750 Less interest and taxes:         Interest expense $ 99,200     Tax expense   78,960   178,160 Net income     $ 68,590 

The company paid dividends of $202,000 last year. The "Investment in Balsam 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 Redstone has set a minimum required return of 18%. What was the company's residual income last year?