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What will be the expected residual income

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Question - For the year 2019, the specialty chemicals division of Newmont and Co., had an investment turnover ratio of 2, return on sales of 20% and total revenues of $100 million. The Newmont and Co. uses residual income to evaluate its divisions. The required rate of return used for residual income calculation by Newmont and Co., is 20%, For 2020, the division expects to grow the existing business by deciding to invest in a new investment opportunity requiring an additional investment of $30 million that would yield an additional income of $10 million. What will be the expected residual income for 2020?

Reference no: EM132971262

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