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Consider the following for Division A Sales = $7,000,000; Average operating assets = $2,500,000; Net operating income = $475,000, Minimum required rate of return =
Consider the following for Division A Sales = $7,000,000; Average operating assets = $2,500,000; Net operating income = $475,000, Minimum required rate of return = 15% I What is the residual income? $100,000. $375,000 $475,000. $575,000 None of the above Consider the following for Division A Sales = $7,000,000 Average operating assets = $2,500,000, Net operating income = $475,000, Minimum required rate of return = 15% Assume that the Division A manager is presented with an investment opportunity that would yield a rate of return of 17%. Determine whether the Division A manager would accept or reject the opportunity under the following two scenarios: 1) The company evaluates its Division managers based on return on investment (ROI); 2) The company evaluates its Division managers based on residual income Accept under Scenario 1 and reject under Scenario 2. Accept under either Scenario. Reject under either Scenario. Reject under Scenario 1 and accept under Scenario 2. 1 0
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