The New Products Division of Testar Company, had operating income of $8,800,000 and operating assets of $45,600,000 during the current year. The New Products Division has developed a potential new product that would require $9,300,000 in operating assets and would be expected to provide $2,200,000 in operating income each year. Testar has set a target return on investment (ROI) of 19% for each of its divisions. Assuming that the new product is put into production, calculate the residual income for the division.
A. $1,631,000
B. $569,000
C. $529,000
D. $369,000
Answer: B
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