Question: Refer to the data for problem regarding Long Beach Pharmaceutical Company. Required: Compute each divisions residual income for the year under each of the following

Refer to the data for problem regarding Long Beach Pharmaceutical Company.

Division II Division I $ 900,000. $ 200,000 $1,000,000 20% Income Average invested capital . $6,000,000 15% ROI


Required: 

Compute each division’s residual income for the year under each of the following assumptions about the firm’s cost of acquiring capital.

1. 12 percent.

2. 15 percent.

3. 18 percent.

Which division was more successful? Explain your answer.

Division II Division I $ 900,000. $ 200,000 $1,000,000 20% Income Average invested capital . $6,000,000 15% ROI

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