A Corporation Has a Required Rate of Return of 13

question 96

Multiple Choice

A corporation has a required rate of return of 13% for all subsidiaries.The Calgary subsidiary earned residual income of $200,000 in year 1, and $300,000 in year 2 on an investment base of $4,500,000.What rate of return did the Calgary subsidiary earn in years 1 and 2 respectively?

• A)17.4% and 19.7%
• B)4.4% and 6.7%
• C)13.0% and 13.0%
• D)7.9% and 10.9%
• E)10.00% and 13.00%