Lambda Division had the following information: Asset base in Lambda Division $400,000 Net income in Lambda Division...
Lambda Division had the following information:
| Asset base in Lambda Division | $400,000 |
| Net income in Lambda Division | $ 50,000 |
| Weighted average cost of capital | 12% |
| Target ROI | 15% |
| Margin for Lambda Division | 20% |
What is the residual income for Lambda Division?
a.$7,500
b.$48,000
c.$60,000
d.$(10,000)
Homework Answers
Residual income = Net income-Target income
= 50000-(400000*15%)
Residual income = -10000
So answer is d) ($10000)
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