Pendant Publishing reported the following results for its
Textbook Division:
Sales | $4,600,000 |
Operating income | $690,000 |
Total assets | $2,000,000 |
Current liabilities | $1,100,000 |
Pendant's target rate of return is 17% and the weighted average
cost of capital is 16%. Its effective tax rate is 40%.
What is the Textbook Division's Residual Income (RI)?
$350,000 |
||
$320,000 |
||
$1,056,000 |
||
$340,000 |
Answer: Option (a) $350,000 is correct
Residual Income= Operating Income-(Operating assets*target rate of return)
=690,000-(2,000,000*17%)
=350,000
Pendant Publishing reported the following results for its Textbook Division: Sales $4,600,000 Operating income $690,000 Total...
Pendant Publishing reported the following results for its Textbook Division: Sales Operating income Total assets Current liabilities $2,200,000 $440,000 $1,100,000 $1,140,000 Pendant's target rate of return is 24% and the weighted average cost of capital is 14%, its effective tax rate is 25% What is the Textbook Division's Return on Investment (ROI)? A. OB. OC. OD. 40.00% 20.00% 200.00% 51.82% Click to select your answer.
The Top Hat Division of Blandon's Fine Menswear had the following results last year (in thousands). Sales Operating income Total assets Current liabilities $4,600,000 $690,000 $2,000,000 $230,000 Management's target rate of return is 9% and the weighted average cost of capital is 5%. What is the Top Hat Division's Residual Income (RI)? O A. $276,000 O B. 510,000 O C. $230,000 OD, $460,000
The Jazz Division of Heights Recording Corporation reported the following results last year: Sales $10,000,000 Operating Income $2,200,000 Total Assets $4,000,000 Current Liabilities $2,500,000 Management's target rate of return is 12% and the weighted average cost of capital is 9%. Its effective tax rate is 32%. Calculate the ROI for the Jazz Division. A. 22% B. 12% C. 88% D. 55% Did the Jazz Division earn or exceed the target rate of return? A. Yes B. No
The Box Manufacturing Division of the Allied Paper Company reported the following results from the past year. Shareholders require a return of 6%. Management calculated a weighted−average cost of capital (WACC) of 3%. Allied's corporate tax rate is 35%. Sales $900,000 Operating income 135,000 Total assets 1,500,000 Current liabilities 600,000 What is the division's Residual Income (RI)? A. $81,000 B. $47,250 C. $45,000 D. $90,000
The Rainy Division of Seattle Corporation reported the following results from the past year. Shareholders require a return of 11% Management calculated a weighted-average cost of capital (WACC) of 2%. Rainy's corporate tax rate is 30 %. $900.000 225,000 $1,700,000 800,000 Sales Operating income Total assets Current liabilities What is the division's Residual Income (RI)? O $99,000 O $126.000 O $225.000 O $38,000
Assume the Hiking Shoes division of the All About Shoes Corporation had the following results last year (in thousands). Management's target rate of return is 55% and the weighted average cost of capital is 10%. Its effective tax rate is 25%. Sales $ 6 comma 000 comma 000$6,000,000 Operating income 1 comma 800 comma 0001,800,000 Total assets 3 comma 500 comma 0003,500,000 Current liabilities 840 comma 000840,000 What is the division's Residual Income (RI)? a. $406,250 b. $1,500,000 c. $1,450,000...
Sales Operating income Total assets Current liabilities $2,200,000 $440,000 $1,100,000 $1,460,000 Pendant's target rate of return is 14% and the weighted average cost of capital is 13%, its effective tax rate is 25%. What is the Textbook Division's capital turnover? OA. 2.0 O B. 2.5 O C. 5.0 O D. 1.5
The Top Hat Division of Blandon's Fine Menswear had the following results last year (in thousands). Sales Operating income Total assets Current liabilities $4,200,000 $840,000 $1,500,000 $260,000 Management's target rate of return is 11% and the weighted average cost of capital is 8%. What is the Top Hat Division's Residual Income (RI)? $580,000 $336,000 $675,000 $378,000
The Rainy Division of Seattle Corporation reported the following results from the past year. Shareholders require a retu is 25% of 5% Management calculated a weighted-average cost of captal (VACC) of 3% Rainy's corporate tax rate s000,000 Sales Operating income Total assets Current fabilties 180,000 1,300,000 300,000 What is the division's Residual Income (RI OA $115.000 OB $150,000 Oc. $30,000 OD. $180,000
The Top Hat Division of Blandon's Fine Menswear had the following results last year (in thousands) Sales Operating income Total assets Current liabilities $4,200,000 $840,000 $1,500,000 $290,000 Management's target rate of return is 24% and the weighted average cost of capital is 17% What is the Top Hat Division's Return on Investment (ROI)? 6.90% 56.00% 20.00% 280.00%