Why should I choose AnalystNotes?
AnalystNotes specializes in helping candidates pass. Period.
Basic Question 5 of 5
The total asset value for ABC Corp. is $12 million, of which 40% is financed with equity while the remainder is financed with debt. The cost of equity is 8% and the tax rate is 40%. If the company reports a net income of $2.4 million, what is the best measure of the firm's residual income?
B. $1,440,000
C. $2,016,000
A. ($1,440,000)
B. $1,440,000
C. $2,016,000
User Contributed Comments 1
| User | Comment |
|---|---|
| samjhyip | There is no mention about the cost of debt here. So I guess that the default method to use would be the equity charge method? |
I just wanted to share the good news that I passed CFA Level I!!! Thank you for your help - I think the online question bank helped cut the clutter and made a positive difference.
Edward Liu
Learning Outcome Statements
calculate and interpret residual income, economic value added, and market value added;
CFA® 2025 Level II Curriculum, Volume 4, Module 24.