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Kevin Thomas is the general manager of the Modular Homes Division, and his performance is...

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Accounting

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)

Category Amount (thousands)
Working capital $ 2,800
Revenue 40,000
Plant and equipment 27,200

If the cost of capital is 16% and Thomas wants to achieve a residual income target of $2,100,000, what will costs have to be in order to achieve the target?

$33,996,000.

$12,800,000.

$33,100,000.

$15,600,000.

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