The Pasta Division of Whole Grain Corporation Had Sales of $5,500,000

Multiple Choice

The Pasta Division of Whole Grain Corporation had sales of $5,500,000 and operating income of $1,375,000 last year. The total assets of the Pasta Division were $2,750,000, while current liabilities were $280,000. Whole Grain Corporation's target rate of return is 15%, while its weighted average cost of capital is 7%. The effective tax rate for the company is 20%. What is the Pasta Division's Residual Income (RI) ?

A) $962,500
B) $1,100,000
C) $1,182,500
D) $412,500