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Calculate residual earnings

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Reference no: EM132718474

Here are summary financial statements for a firm (in millions of dollars):

          Income Statement, 2012                    Balance Sheet, End of 2011

Operating income 1,400                        Net operating assets 10,000

Interest expense 500                             Financing debt 5,000

Net income 900                                  Common equity 5,000

The required return for equity is 12 percent, the required return for operations is 11 percent, and the required return for debt is 10 percent. The firm pays no taxes.

Problem 1: Calculate residual earnings, residual operating income, and residual income from financing activities for 2012.

Reference no: EM132718474

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