Assume the Cell Phone Division of the First Electronics Corporation

question 84

Multiple Choice

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%. $$\begin{array} { | l | r | } \hline \text { Sales } & \$ 6,000,000 \\\hline \text { Operating income } & 900,000 \\\hline \text { Total assets } & 3,000,000 \\\hline \text { Current liabilities } & 750,000 \\\hline\end{array}$$
-What is the division's Residual Income (RI) ?

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

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Definitions:

Supply Chain

The network of all businesses involved in creating and distributing a product, from raw materials to finished goods delivered to the customer.

Capacity Shortage

A situation where the demand for a product or service exceeds the production capacity of the facilities designed to supply it.

Capacity Shortage

A situation where the demand for a company's goods or services exceeds its ability to produce or supply them, often leading to delivery delays or unsatisfied demand.

Excessive Cancellations

A higher than normal rate of voided orders or terminated services, often indicating problems in business operations or customer satisfaction.