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What will be the increase in residual income of the subunit

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Question - The current profit for a subunit is $36,000. Its current invested capital is $200,000. The subunit is considering purchasing for $20,000 equipment that will increase annual profit by an estimated $2,800. The firm's cost of capital is 12%. If the equipment is purchased, what will be the increase in residual income of the subunit?

a) 4%

b) $16,000

c) $2,800

d) $400

Reference no: EM132828107

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