Oswego Company has three divisions: A, B, and C. The company has a hurdle rate o

Question

Oswego Company has three divisions: A, B, and C. The company has a hurdle rate of 7 percent. Selected operating data of the three divisions are as follows:

Oswego is considering an expansion project in the upcoming year that will cost $5 million and return $400,000 per year. The project would be implemented by only one of the three divisions.

Compute the residual income for each division. (Negative amounts should be indicated by a minus sign. Omit the "$" sign in your response.)

Division A Division B Division C Sales $ 1,255,000 $ 920,000 $ 898,000 Cost of goods sold 776,000 675,000 652,000 Miscellaneous operating expenses 64,000 52,000 53,100 Allocated corporate expenses 48,000 41,000 41,500 Average invested assets 4,150,000 3,860,000 3,215,000

Explanation / Answer

58 percnt

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