Sherwin Corporation has three business segments: paint, wallpapers, and tools. The company's assumed cost of capital is 10%. Financial information about each segment follows.

Paint Segment Wallpaper Segment Tools Segment Paint
Segment operating income $680,000 $480,000 $800,000
Invested capital 6,000,000 3,800,000 8,000,000

(a) Calculate residual income for each segment.
(b) Assuming a reduction in assumed cost of capital to 5%, prepare a revised analysis of residual income. Does this revised assumption alter the rankings?

A.
4(a) Paint Residual income $90,000
4(a) Wallpaper Residual income $110,000
4(a) Tools Residual income $10
4(b) Paint Residual income $390,000
4(b) Wallpaper Residual income $295,000
4(b) Tools Residual income $403,000

B.
4(a) Paint Residual income $80,000
4(a) Wallpaper Residual income $100,000
4(a) Tools Residual income $0
4(b) Paint Residual income $380,000
4(b) Wallpaper Residual income $290,000
4(b) Tools Residual income $400,000
C.
4(a) Paint Residual income $78,000
4(a) Wallpaper Residual income $96,000
4(a) Tools Residual income $30
4(b) Paint Residual income $240,000
4(b) Wallpaper Residual income $267,000
4(b) Tools Residual income $360,000

D.
4(a) Paint Residual income $88, 000
4(a) Wallpaper Residual income $106,000
4(a) Tools Residual income $40
4(b) Paint Residual income $260,000
4(b) Wallpaper Residual income $160,000
4(b) Tools Residual income $240,000

E.
4(a) Paint Residual income $66,000
4(a) Wallpaper Residual income $76,000
4(a) Tools Residual income $70
4(b) Paint Residual income $385,000
4(b) Wallpaper Residual income $293,000
4(b) Tools Residual income $409,000

F. None of the above