Disposes of hazardous waste and subsidiary

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Jackie Chin Waste Management has a subsidiary that disposes of hazardous waste and a subsidiary that collects and disposes of residential garbage. Information related to the two subsidiaries follows:

  Hazardous Residential
  Waste Waste
Total assets $12,000,000 $72,000,000
Noninterest-bearing current liabilities 3,000,000 12,000,000
Net income 1,700,000 6,000,000
Interest expense 1,250,000 2,300,000
Required rate of return 8% 10%
Tax rate 35% 40%

Based on the limited information, which subsidiary is the best candidate for expansion?

A. Hazardous waste, because it has a higher residual income.

B. Hazardous waste, because it has a higher return on investment

C. Residential waste, because it has a higher residual income.

D. Residential waste, because it has a higher return on investment

Reference no: EM13759317

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