Corner’s residual income would be $180000.
What does residual income mean?
- The money that continues to flow after an original investment of time and resources has been completed is referred to as residual income. Artist royalties, rental income, interest income, and dividend payments are all examples of residual income.
- Monthly income less monthly debts such as home payments and credit card bills equals residual income. Residual income can help you enhance your finances and pay off debt faster, save for retirement, and build up your savings.
- The following is how residual revenue is calculated: Operating income minus residual income = residual income (minimum required return x operating assets).
Given :
Operating income = $1,500,000
imputed interest rate of 11%
Invested capital/ Operating Asset = $12,000,000
Residual income = $1500000− (11% × 12000000)
=1500000 -1320000 = $180000.
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