Assume the Cell Phone Division of the First Electronics Corporation had the following results last year (in thousands).Management's target rate of return is 10% and the weighted average cost of capital is 7%.Its effective tax rate is 30%. $$\begin{array} { | l | r | }
\hline \text { Sales } & \$ 6,000,000 \
\hline \text { Operating income } & 900,000 \
\hline \text { Total assets } & 3,000,000 \
\hline \text { Current liabilities } & 750,000 \
\hline
\end{array}$$
-What is the division's Residual Income (RI)?
A)$472,500
B)$600,000
C)$690,000
D)$300,000

Question

Assume the Cell Phone Division of the First Electronics Corporation had the following results last year (in thousands).Management's target rate of return is 10% and the weighted average cost of capital is 7%.Its effective tax rate is 30%. $$\begin{array} { | l | r | } 
\hline \text { Sales } & \$ 6,000,000 \
\hline \text { Operating income } & 900,000 \
\hline \text { Total assets } & 3,000,000 \
\hline \text { Current liabilities } & 750,000 \
\hline
\end{array}$$ 
-What is the division's Residual Income (RI)?
A)$472,500
B)$600,000
C)$690,000
D)$300,000

Quizplus · Accepted Answer

The Answer of  Assume the Cell Phone Division of the First Electronics Corporation had the following results last year (in thousands).Management's target rate of return is 10% and the weighted average cost of capital is 7%.Its effective tax rate is 30%. $$\begin{array} { | l | r | } 
\hline \text { Sales } & \$ 6,000,000 \
\hline \text { Operating income } & 900,000 \
\hline \text { Total assets } & 3,000,000 \
\hline \text { Current liabilities } & 750,000 \
\hline
\end{array}$$ 
-What is the division's Residual Income (RI)?
A)$472,500
B)$600,000
C)$690,000
D)$300,000