Sheridan Decor sells home decor items through three distribution channelsretail stores, the Internet, and catalog sales. Each distribution channel is evaluated as an investment center. Selected results from the latest year are as follows:

	Retail Stores		Internet		Catalog Sales
Sales revenue	$9,960,000		$3,910,000		$3,080,000
Variable expenses	3,910,000		1,460,000		1,760,000
Direct fixed expenses	4,410,000		960,000		1,160,000
Average assets	7,910,000		3,910,000		1,720,000
Required rate of return	12%		12%		12%

(a)

Calculate the current residual income for each distribution channel. (If the residual income is a loss then enter with a negative sign preceding the number, e.g. -5,125 or parenthesis, e.g. (5,125).)

		Residual Income
Retail		$enter a dollar amount
Online		$enter a dollar amount
Catalog		$enter a dollar amount

b. The corporate office is giving the managers of each channel the option of a customer relationship management system that will allow the managers to gather data about their customers and be more effective in their marketing efforts. The system will cost $760,000 and is expected to generate $151,000 in additional annual segment margin. Calculate the residual income of each distribution channel assuming it purchases the new customer relationship management system. (If the residual income is a loss then enter with a negative sign preceding the number, e.g. -5,125 or parenthesis, e.g. (5,125).)

		Residual Income
Retail		$enter a dollar amount
Online		$enter a dollar amount
Catalog		$enter a dollar amount

Paula Boothe, president of the Bramble Corporation, has mandated a minimum 10% return on investment for any project undertaken by the company. Given the companys decentralization, Paula leaves all investment decisions to the divisional managers as long as they anticipate a minimum rate of return of at least 12%. The Energy Drinks division, under the direction of manager Martin Koch, has achieved a 14% return on investment for the past three years. This year is not expected to be different from the past three. Koch has just received a proposal to invest $1,800,000in a new line of energy drinks that is expected to generate $312,000 in operating income. Assume that Bramble Corporations actual weighted-average cost of capital is 10% and its tax rate is 32%.

(a) Calculate the economic value added of the proposed new line of energy drinks. (If the economic value added is negative then enter with a negative sign preceding the number, e.g. -5,125 or parenthesis, e.g. (5,125). Round answer to 0 decimal places, e.g. 5,125.)

Economic value added

$enter the economic value added in dollars rounded to 0 decimal places