This Question: 1 pt 180134 (12 complete) ? This Quiz: 34 pts possible Assume the

Question

This Question: 1 pt 180134 (12 complete) ? This Quiz: 34 pts possible Assume the Air Conditioning division of the General Appliance Corporation had the following resultslast year(n thousands) Management's target rate of return is 15% and the weighted average cost of capital is 25%. Its effective tax rate is 25% Sales $13,000,000 Operating income 3,250,000 Total assets Current liabilities 4,000,000 810,000 What is the division's Residual Income (RI)? OA. $3.250,000 O C. $662,500 p O B. $2.250,000 O D. $2,650,000

Explanation / Answer

D. $2,650,000

Residual Income = $3,250,000 - ($4,000,000 * 15%)

Residual Income = $2,650,000

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