Texas Company has established a target rate of return of 16% for all divisions. For the most recent year, San Marcos Division generated sales of $10,000,000 and expenses of $7,500,000 . Total assets at the beginning of the year were $5,000,000 and total assets at the end of the year were $7,000,000. Refer to Texas Company. In the most recent year, what was San Marcos Division's residual income?
a. $ 960,000
b. $1,380,000
c. $1,540,000
d. $1,700,000
C
Residual Income = $(10,000,000 - 7,500,000) - ((.16) * $6,000,000)
= $(2,500,000 - 960,000)
=$1,540,000
Business
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