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For 2014, the New Products Division, of Testar Company, had operating income of $9,200,000 and...

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Accounting

For 2014, the New Products Division, of Testar Company, had operating income of $9,200,000 and operating assets of $46,000,000. The New Products Division has developed a potential new product that would require $9,700,000 in operating assets and would be expected to provide $2,600,000 in operating income each year. Testar has set a target return on investment (ROI) of 20% for each of its divisions. Assuming that the new product is put into production, calculate the residual income for the division.

a) $660,000

b) $1,940,000

c) $460,000

d) $620,000

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