Compute the residual income for the division

Reference no: EM131884842

Question: For 2014, the New Products Division, of Testar Company, had operating income of $10,000,000 and operating assets of $46,800,000. The New Products Division has developed a potential new product that would require $10,500,000 in operating assets and would be expected to provide $3,400,000 in operating income each year. Testar has set a target return on investment (ROI) of 22% for each of its divisions. Assuming that the new product is put into production, calculate the residual income for the division.

Reference no: EM131884842

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