The manager of Synergy Company's Stock Division projects the following for next year:

The manager can invest in an additional project that would require $50,000 investment in additional assets and would generate $9,000 of additional income.
-The company's minimum rate of return is 15%.What is the residual income for the Stock Division without the additional investment?

A) $13,450
B) $6,000
C) $16,600
D) $18,000
E) $12,250

Question

The manager of Synergy Company's Stock Division projects the following for next year:

The manager can invest in an additional project that would require $50,000 investment in additional assets and would generate $9,000 of additional income.
-The company's minimum rate of return is 15%.What is the residual income for the Stock Division without the additional investment?

A) $13,450 
B) $6,000 
C) $16,600 
D) $18,000 
E) $12,250

Quizplus · Accepted Answer

Residual Income = Operating Income - (Minimum Rate of Return × Average Operating Assets) = $70,000 - (0.15 × $385,000) = $12,250

The Manager of Synergy Company's Stock Division Projects the Following