What Is the Residual Income for a Firm with $1

Multiple Choice

What is the residual income for a firm with $1 million in total capital, $300,000 in net income, and a 20% cost of capital?

A) $400,000
B) $300,000
C) $200,000
D) $100,000 Total capital x cost of capital
$1 million x .2 = $200,000
Residual income = Net Income - Cost of Capital