Assume a Cool Dvision of General Appliance Corporation is considering purchasing an Air Conditioning Company that had the following results last year (in thousands). General Appliance Corporation target rate of return is 5% and the weighted average cost of capital is 10%. Its effective tax rate is 35%. Cool Division's current ROI is 20%.

Sales	$ 10,000,000
Operating income	2,000,000
Total assets	25,000,000
Current liabilities	820,000

What is Air Conditioning Company's Residual Income (RI) and if Cool Division's management is evaluated based on RI would they invest?

A.

$750,000 and invest

B.

$791,000 and not invest

C.

$750,000 and not invest

D.

$1,250,000 and invest