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What is the residual income for stock division

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Reference no: EM133184426

Question - The manager of the Stock Division projects the following for next year:

Sales P185,000

Operating income P60,000

Operating assets P375,000

The manager can invest in an additional project that would require P40,000 investment in additional assets and would generate P6,000 of additional income. The company's minimum rate of return is 14%.

Required -

1. What is the residual income for Stock Division without the additional investment?

2. What is the residual income for Stock Division with the additional project?

Reference no: EM133184426

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