Assume the Air Conditioning division of the General Appliance Corporation had the following results last year (in thousands). Management's target rate of return is 15% and the weighted average cost of capital is 10%. Its effective tax rate is 35%. What is the division's Residual Income (RI)?
A)$1,625,000
B)$1,132,364
C)$1,750,000
D)$500,000

Question

Assume the Air Conditioning division of the General Appliance Corporation had the following results last year (in thousands). Management's target rate of return is 15% and the weighted average cost of capital is 10%. Its effective tax rate is 35%.  What is the division's Residual Income (RI)?
A)$1,625,000 
B)$1,132,364 
C)$1,750,000 
D)$500,000

Quizplus · Accepted Answer

The Answer of Assume the Air Conditioning division of the General Appliance Corporation had the following results last year (in thousands). Management's target rate of return is 15% and the weighted average cost of capital is 10%. Its effective tax rate is 35%.  What is the division's Residual Income (RI)?
A)$1,625,000 
B)$1,132,364 
C)$1,750,000 
D)$500,000

Assume the Air Conditioning Division of the General Appliance Corporation