Refer to the data for problem regarding Long Beach Pharmaceutical Company. Required: Compute each divisions residual income
Question:
Refer to the data for problem regarding Long Beach Pharmaceutical Company.
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.
Transcribed Image Text:
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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