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%

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Definitions:

Individual Loafing

A tendency for people to exert less effort when working in a group compared to when working alone, known as social loafing.

Teams

Groups of individuals working together towards a common goal or objective.

Social Facilitation

The tendency for one’s behavior to be influenced by the presence of others in a group.

Enthusiastic Audience

A group of people who show a high level of excitement or eagerness towards a particular event, presentation, or performer.