Selected Financial Data for the Entertainment Division of Magic Enterprises

Multiple Choice

Selected financial data for the Entertainment Division of Magic Enterprises is as follows: $$\begin{array} { | l | r r | } \hline \text { Sales } & \$ & 7,200,000 \\\hline \text { Operating income } & \$ & 1,440,000 \\\hline \text { Total assets } & \$ & 3,000,000 \\\hline \text { Curgent liabilities } & \$ & 800,000 \\\hline \text { Required rate of return } & & 8 \% \\\hline \text { Weighted average cost of capital } & & 6 \% \\\hline\end{array}$$
- What is the Entertainment Division's residual income?

A) $ 240,000
B) $ 640,000
C) $ 864,000
D) $1,200,000