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The sales, income from operations, and invested assets for each division of Wren Company are as follows: Sales Income from Operations Invested Assets Division C
The sales, income from operations, and invested assets for each division of Wren Company are as follows:
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Sales | Income from Operations | Invested Assets |
| Division C | $5,000,000 | $630,000 | $4,000,000 |
| Division D | 6,800,000 | 760,000 | 3,900,000 |
| Division E | 3,750,000 | 750,000 | 7,500,000 |
Management has established a minimum rate of return for invested assets of 10%.
| (a) | Determine the residual income for each division. |
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| (b) | Based on residual income, which of the divisions is the most profitable? |
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