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Question(s) / Instruction(s):

A companys current net operating income is $20,400 and its average operating assets are $95,000. The companys required rate of return is 20%. A new project being considered would require an investment of $21,900 and would generate annual net operating income of $4,850. What is the residual income of the new project?

a)            $4,380

b)            $470

c)            $770

d)            $4,850


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