The Sunny Division of Miami Corporation reported the following results from the past year.Shareholders require a return of 10%.Management calculated a weighted-average cost of capital (WACC)of 5%.Sunny's corporate tax rate is 30%.

What is the division's Residual Income (RI)?

Question

The Sunny Division of Miami Corporation reported the following results from the past year.Shareholders require a return of 10%.Management calculated a weighted-average cost of capital (WACC) of 5%.Sunny's corporate tax rate is 30%.

What is the division's Residual Income (RI) ?

What is the division's Residual Income (RI)?

Quizplus · Accepted Answer

C)
Operating income 250,000
Less Minimum acceptable income
Target rate of return 10%
Total assets × 1,500,000 (150,000)
Residual Income 100,000

The Sunny Division of Miami Corporation Reported the Following Results