The following data relates to Light Bulb Project that Logan Electric Division is considering.
|
Light Bulb Project sales |
$6,500,000 |
|
Light Bulb Project operating income |
$600,000 |
|
Light Bulb Project total assets |
$3,250,000 |
|
Corporate target rate of return |
16% |
What is the Light Bulb Project 's Residual Income (RI)? If division managers are evaluated on RI and Logan Electric Division currently has an ROI 20% would Logan Electric Division's manager accept or reject the project?
A.
$80,000 and reject
B.
$520,000 and reject
C.
$80,000 and accept
D.
$650,000 and accept
Residual income = Net operating income-Minimum operating income = 600000-(3250000*16%) = 80000
So answer is c) $80000 and accept
The following data relates to Light Bulb Project that Logan Electric Division is considering. Light Bulb...