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1. Consider the following data (in millions) from Trident Financial Incorporated, which has two main divisions, mortgage loans and consumer loans:

	Mortgage Loans	Consumer Loans
Average total assets	$ 1,000	$ 15,000
Operating income	$ 204	$ 1,875
Return on investment (ROI)	20.40%	12.50%

A. Trident uses residual income (RI) as a measure of the financial performance of its divisions. What is the RI for each division if the minimum desired rate of return is (a) 10%, (b) 15%, and (c) 20%? (Leave no cells blank. Negative amounts should be indicated by a minus sign. Enter your answers in millions.)

2. Crain Company has a manufacturing subsidiary in Singapore that produces high-end exercise equipment for U.S. consumers. The manufacturing subsidiary has total manufacturing costs of $1,440,000, plus general and administrative expenses of $344,000. The manufacturing unit sells the equipment for $2,440,000 to the U.S. marketing subsidiary, which sells it to the final consumer for an aggregate of $3,440,000. The sales subsidiary has total marketing, general, and administrative costs of $194,000. Assume that Singapore has a corporate tax rate of 17% and that the U.S. tax rate is 21%. Assume that no tax treaties or other special tax treatments apply.

Required:

What is the effect on Crain Companys total corporate-level taxes if the manufacturing subsidiary raises its price to the sales subsidiary by 20%? (Do not round intermediate calculations. Input all amounts as positive values.)

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