Icey Industries manufactures air conditioning units. The company is a subsidiary of Icey Group and operates as an investment centre. Icey Group requires a cost of capital of 7 per cent. Extracts from the annual financial statements of Icey are below. Included in the operating expenses for the year are central services costs allocated by the head office of US$4.25m. The performance of the manager of Icey Industries is currently measured based on ROI. Extracts from the accounts of Icey Industries Year ended 31 December $000s Revenue 41,500 Cost of sales 30,300 Profit before interest and tax 950 Assets Noncurrent assets 8,400 Inventories 7,850 Trade receivables 6,100 Cash and cash equivalents 12 Total 22,362 Equity and liabilities Equity 12,000 Noncurrent liabilities 2,800 Trade payables 7,562 Total 22,362 What is the RI for Icey Industries at 31 December? Solution 

A.(US$86,000). 

B.US$4,164,000. 

C.US$3,634,660. 

D.US$652,500

Answer rating: 100% (QA)

Residual Income RI is calculated by subtracting a charge for the cost of cap... View the full answer