Refer to the information for Washington Company on the previous
Refer to the information for Washington Company on the previous page. In addition, Washington Company’s top management has set a minimum acceptable rate of return equal to 8 percent.
Washington Company has two divisions: the Adams Division and the Jefferson Division. The following information pertains to last year’s results:
Washington’s actual cost of capital was 12 percent.
Required:
1. Calculate the residual income for the Adams Division.
2. Calculate the residual income for the Jefferson Division.
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