1. Anderson & Co. is a manufacturing company that has two major investment centers. Both divisions have required a significant investment, and management wants to compare the performance of the two divisions. Below is information related to the two divisions.

Division 1 Division 2

Sales $40,000 $80,000

Expenses $25,000 $50,000

Asset investment $150,000 $500,000

Management currently requires investments to meet a rate of return on asset investment of 5%.

Residual Income = Net Operating Income (Investment x Hurdle Rate)

Which is the Residual Income for Division 2? (3 points)