Kevin Thomas is the general manager of the Modular Homes Division, and his performance is measured using the residual income method. Thomas is reviewing the following forecasted information for his division for next year: (CMA adapted)CategoryAmount (thousands)Working capital$1,800 Revenue 30,000 Plant and equipment 17,200 If the cost of capital is 15% and Thomas wants to achieve a residual income target of $2,000,000, what will costs have to be in order to achieve the target?
A. $25,150,000.
B. $25,690,000.
C. $9,000,000.
D. $10,800,000.
Answer: A
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