Pegasus Recycling has a subsidiary that recycles yard waste and another that recycles paper. Information related to the two subsidiaries follows.
Total assets = $8,000,000 (Yard Recyling), $15,000,000 (Paper Recyling)
Non interest-bearing current liabilities = 500,000 (Yard Recyling), 1,000,000 (Paper Recyling)
Net income = 1,500,000 (Yard Recyling), 2,600,000 (Paper Recyling)
Interest expense = 600,000 (Yard Recyling), 800,000 (Paper Recyling)
Required rate of return = 8% (Yard Recyling), 11% (Paper Recyling)
Cost of capital = 7% (Yard Recyling), 9% (Paper Recyling)
Tax rate = 30% (Yard Recyling), 32% (Paper Recyling)
Based on the limited information, which subsidiary is the best candidate for expansion?