The Manager of the West Division of Beach Clothing Company

question 57

Multiple Choice

The manager of the West Division of Beach Clothing Company is evaluating the acquisition of a new embroidery machine.The budgeted operating income of the West Division was $4,000,000 with total assets of $22,000,000 and noninterest-bearing current liabilities of $1,000,000.The proposed investment would add $750,000 to operating income and would require an additional investment of $3,500,000.The targeted rate of return for the West Division is 14 percent and the cost of capital is 9 percent.Ignoring taxes, how much is the residual income of the West division if the embroidery machine is not purchased?

• A)$202,000
• B)$1,930,000
• C)$2,110,000
• D)$1,060,000

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Definitions:

Vitamin K

A fat-soluble vitamin that plays a key role in blood clotting and bone metabolism.

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Measurable Dose

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