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What is the residual income for division a

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Reference no: EM132968636

Question - A firm has two divisions, A and B. Information for each division is as follows:

 

A

B

Operating income before-tax

$40,000

$130,000

Asset base for division

$100,000

$1,200,000

Current liabilities

$10,000

$100,000

Required rate of return

15%

18%

Return on Sales

10%

20%

Weighted average cost of capital (WACC)

12%

12%

Tax rate

20%

20%

Required - What is the residual income for Division A?

Reference no: EM132968636

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