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The Pizza Division of Frozen Foods Corporation reported the following results from the past year. Shareholders require a return of 9%. Management calculated a weighted
The Pizza Division of Frozen Foods Corporation reported the following results from the past year. Shareholders require a return of
9%. Management calculated a weighted
average cost of capital (WACC) of
7%. The company's corporate tax rate is
40%.
Sales | $500,000 |
Operating income | 175,000 |
Total assets | $1,600,000 |
Current liabilities | 300,000 |
What is the division's Residual Income (RI)?
A.
$130,000
B.
$45,000
C.
$175,000
D.
31,000
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