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Tinsley Plastics manufactures plastic bottles used for beverages and household cleaners. The average net book value (NBV) of assets during the quarter is estimated as $510,000. If the required rate of return is 12% on average assets and the firm wants to have residual income (RI) of $101,000 for this quarter, what must its profits be?

Sagot :

marvineetesh3

The profits of the Tinsley Plastics to manufactures plastic bottles is $162,000.

What is profit?

A profit is defined as the monetary profit. It is particularly the difference between the amount earned, and the amount spent on purchasing, operating, or creating anything.


The formula of profit is:

[tex]\text{Profits} =\text{ NBV} *\times \text{Required Rate of Return + Residual Income (RI)}[/tex]

Computation of profit:

According to the given information,

Net Book Value (NBV) =  $510,000,

Rate of Return = 12%

Residual Income (RI) = $101,000

Now, apply the given values in the formal of profit,

[tex]\text{Profits} =\text{ NBV} *\times \text{Required Rate of Return + Residual Income (RI)}\\\\\text{Profits} = \$510,000 \times 12\% + \$101,000\\\\\text{Profits} =\$162,000[/tex]

Therefore, the firm's profits must be $162,000.

Learn more about the profits, refer to:

https://brainly.com/question/15036999

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