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RI A company has 2 divisions with the ff. data: Division A Sales - 30M OI - 1.8M Average operating assets - 10M Division B

A company has 2 divisions with the ff. data:

Division A

Sales - 30M

OI - 1.8M

Average operating assets - 10M

Division B

Sales - 117M

OI - 3.51M

Average operating assets - 19.5M

The company requires a 12% minimum rate of return.

A. For each division, compute their residual income.

B. How would a 16% minimum required rate of return affect each division's residual income?

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