Return on investment and residual income The following information pertains to VI Division, which has $1,400,000 in investments.
|
Division sales revenue |
$900,000 |
|
Less division expenses |
480,000 |
|
Division income |
$420,000 |
The company’s cost of capital is 10%.
Required
(a) What is the division’s return on investment?
(b) What is the division’s residual income?