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Residual Income The income from operations and the amount of invested assets in each division of Devon Industries are as follows: Income from Operations Invested

Residual Income

The income from operations and the amount of invested assets in each division of Devon Industries are as follows:

Income from Operations Invested Assets
Sporting Goods Division $155,400 740,000
Health Care Division 70,200 390,000
Commercial Division 67,600 260,000

Assume that management has established a 12% minimum acceptable rate of return for invested assets.

a. Determine the residual income for each division.

Sporting Goods Division Health Care Division Commercial Division
Income from operations $155,400 $70,200 $67,600
Minimum amount of income from operations
Residual income $ $ $

b. Which division has the most residual income?

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