Assume the Air Conditioning Division of the General Appliance Corporation

question 190

Multiple Choice

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