Question: 1. Meade Corp has the following operating data for the past 2 years: Year 1 Year 2 Return on Investment 10% 20% Residual Income ?

1. Meade Corp has the following operating data for the past 2 years:

Year 1

Year 2

Return on Investment

10%

20%

Residual Income

?

$25,000

Required Rate of return

8%

10%

Sales

$400,000

$500,000

Asset Turnover

?

?

The sales margin in year 2 is twice the margin for the first year.

The Company had the same asset turnover in both years.

What is the residual income in year1?

A.

$4,000

B.

$8,000

C.

$10,000

D.

$12,000

E.

None of the above

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