Correll Company Has Two Divisions, a and B What Is the Residual Income for A?
A)£40,000
B)£25,000
C)£15,000

Multiple Choice

Correll Company has two divisions, A and B. Information for each division is as follows: $\begin{array}{lcc}&A&B\\\text { Net earnings for divi sion } & £ 40,000 & £ 260,000 \\\text { Asset base for division } & £ 100,000 & £ 1,200,000 \\\text { Target rate of return } & 15 \% & 18 \% \\\text { Margin } & 10 \% & 20 \% \\\text { Weighted average cost of capital } & 12 \% & 12 \%\end{array}$ What is the residual income for A?

A) £40,000
B) £25,000
C) £15,000
D) £28,000