Question

Financial data for Bridger Inc. for last year are as follows:

BRIDGER INC. Balance Sheet
	Ending Balance			Beginning Balance
Assets
Cash	$	164,000		$	159,000
Accounts receivable		480,000			340,000
Inventory		490,000			540,000
Plant and equipment, net		896,000			931,000
Investment in Brier Company		590,000			560,000
Land (undeveloped)		410,000			410,000
Total assets	$	3,030,000		$	2,940,000
Liabilities and Shareholders’ Equity
Accounts payable	$	350,000		$	390,000
Long-term debt		1,200,000			1,200,000
Shareholders’ equity		1,480,000			1,350,000
Total liabilities and shareholders’ equity	$	3,030,000		$	2,940,000

    

BRIDGER INC. Income Statement
Sales				$	4,400,000
Operating expenses					3,740,000
Operating income					660,000
Interest and taxes:
Interest expense	$	134,000
Tax expense		214,000			348,000
Net income				$	312,000

   

The company paid dividends of $193,000 last year. The “Investment in Brier Company” on the balance sheet represents an investment in the common shares of another company.

Required:

1a.	Compute the company’s margin, turnover, and ROI for last year. (Round your intermediate calculations and final answers to 1 decimal place.)

1.b.	The board of directors of Bridger Inc. has set a minimum required return of 20%. What was the company’s residual income last year?

Answer 1