The New Products Division of Testar Company, Had Operating Income

Multiple Choice

The New Products Division of Testar Company, had operating income of $9,800,000 and operating assets of $46,600,000 during the current year. The New Products Division has developed a potential new product that would require $10,300,000 in operating assets and would be expected to provide $3,200,000 in operating income each year. Testar has set a target return on investment (ROI) of 22% for each of its divisions. Assuming that the new product is put into production, calculate the residual income for the division.

A) $442,000
B) $482,000
C) $2,718,000
D) $282,000