Answer:
It is $9,450 (A)
Explanation:
Return on Investment = 40% * $ 45,000
=$18,000
Minimum Required Return = 19% *$ 45,000
= $8,550
Hence, Residual Income = $18,000-$8,550
=$9,450
Minimum required return represents the amount of returns that must be generated on investment to satisfy the expectations of providers of funds.
Residual income is what is left after dividends and interest have been paid to the various investors which can be retained for future investment.
