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The New Products Division of Testar Company Had Operating Income

question 71

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The New Products Division of Testar Company had operating income of $8,000,000 and operating assets of $44,800,000 during the current year.The New Products Division has developed a potential new product that would require $8,500,000 in operating assets and would be expected to provide $1,400,000 in operating income each year.Testar has set a target return on investment (ROI) of 16% for each of its divisions.Assuming that the new product is put into production,calculate the residual income for the division.

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Definitions:

Duplex Mind

Describes the concept that the human mind has two different processing systems: an automatic, unconscious system and a deliberate, conscious system.

Human Brain

The central organ of the human nervous system, responsible for processing sensory information, regulating bodily functions, and enabling thoughts, emotions, and behaviors.

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A landmass located in the tropics, characterized by warm climates, and surrounded by the sea, often considered paradisiacal.

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