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Solution to ROI vs. RI Problem
Before
Investment
Investment
After
Investment
ROI
Operating Income
Average Operating Assets
ROI
$240,000
$2,000,000
$50,000
$500,000
$290,000
$2,500,000
12.00%
10.00%
11.60%
Residual Income
Operating Income
Minimum Required Return
Residual Income
$240,000
$160,000
$80,000
$290,000
$200,000
$90,000
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