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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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