Assume the Hiking Shoes division of the All About Shoes Corporation had the following results last year (in thousands). Management's target rate of return is 20% and the weighted average cost of capital is 30%. Its effective tax rate is 40%. What is the division's Residual Income (RI)?
A)$1,050,000
B)$420,000
C)$2,000,000
D)$950,000

Question

Assume the Hiking Shoes division of the All About Shoes Corporation had the following results last year (in thousands). Management's target rate of return is 20% and the weighted average cost of capital is 30%. Its effective tax rate is 40%.  What is the division's Residual Income (RI)?
A)$1,050,000 
B)$420,000 
C)$2,000,000 
D)$950,000

Quizplus · Accepted Answer

The Answer of Assume the Hiking Shoes division of the All About Shoes Corporation had the following results last year (in thousands). Management's target rate of return is 20% and the weighted average cost of capital is 30%. Its effective tax rate is 40%.  What is the division's Residual Income (RI)?
A)$1,050,000 
B)$420,000 
C)$2,000,000 
D)$950,000

Assume the Hiking Shoes Division of the All About Shoes