Use the Information Below to Answer the Following Question(s)

question 162

Multiple Choice

Use the information below to answer the following question(s) :
Assume the Cell Phone Division of the First Electronics Corporation had the following results last year (in thousands) . Management's target rate of return is 10% and the weighted average cost of capital is 7%. Its effective tax rate is 30%.

-What is the First Electronics Corporation cell phone division's Residual Income (RI) ?

• A) $472,500
• B) $600,000
• C) $690,000
• D) $300,000

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Definitions:

Purchases Returns

Goods returned by a buyer to the seller, often due to defects or dissatisfaction, resulting in a refund or credit.

Purchase Discounts

Discounts a buyer receives for paying suppliers early, which are used to reduce the cost of purchased goods.

Net Purchases

Net purchases are the total amount of purchases minus returns, allowances, and discounts over a specified period, often used in analyzing inventory costs.

Sales Discounts

Reductions in the price of goods or services offered as an incentive to customers to encourage prompt payment.