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Residual Income The income from operations and the amount of invested assets in each division of Beck Industries are as follows: Income from Operations Invested
Residual Income
The income from operations and the amount of invested assets in each division of Beck Industries are as follows:
Income from Operations | Invested Assets | |||
Retail Division | $132,000 | $660,000 | ||
Commercial Division | 143,000 | 650,000 | ||
Internet Division | 67,200 | 420,000 |
Assume that management has established a 8% minimum acceptable return for invested assets.
a. Determine the residual income for each division.
Retail Division | Commercial Division | Internet Division | |||||||
Income from operations | $132,000 | $143,000 | $67,200 | ||||||
Minimum acceptable income from operations as a percent of invested assets | |||||||||
Residual income | $ | $ | $ |
b. Which division has the most residual income?
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