Assume the Hiking Shoes division of the Simply Shoes Company had the following results last year (in thousands). Management's target rate of return is

20% and the weighted average cost of capital is

5%. Its effective tax rate is

30%.

Sales	$9,000,000
Operating income	2,250,000
Total assets	2,000,000
Current liabilities	790,000

What is the division's Residual Income (RI)?

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Part 1

A.

$2,700,000

B.

$555,000

C.

$1,850,000

D.

2,150,000