Calculator The Magrola Co prys Division A has ncome from ope

Calculator The Magrola Co prys Division A has ncome from operations of $80,000 and assets of $400,000. The minimum acceptable rate of return on assets is 12%. What is the residual income for the division?

Solution

Solution:

Income from operations = $80,000

Minimum required return = invested assets × minimum acceptable rate of return

= $400,000 × 12% = $48,000

Residula income for divison = income from operations - minimum required return

= $80,000 - $48,000

= $32,000