Refer to the S.P.R. Company information in Exercise 12-13. In addition, S.P.R. Company's top management has set

Question:

Refer to the S.P.R. Company information in Exercise 12-13. In addition, S.P.R. Company's top management has set a minimum acceptable rate of return equal to 8 percent.
In Exercise 12-13
S.P.R. Company has two divisions: the Tana division and the Rabinur division. The following information pertains to last year's results:

Tana Division Rabinur Division Net (after-tax) income Operating assets 6,000,000 4,875,000

S.P.R.'s actual cost of capital was 12 percent.
Required:
1. Calculate the residual income for the Tana division.
2. Calculate the residual income for the Rabinur division.

Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...