Question

Cabell Products is a division of a major corporation. Last year the division had total sales of $13,420,000, net operating income of $1,261,480, and average operating assets of $2,684,000. The company's minimum required rate of return is 15%. The division's return on investment (ROI) is closest to:

Answer 1

Answer:

47%

Explanation:

The computation of the return on investment is shown below:

As we know that

Return on investment =  net operating income ÷ average operating assets

where,

net operating income is $1,261,480

And, the average operating assets is $2,684,000

Now placing these values to the above formula

So, the return on investment is

= ($1,261,480 ÷ $2,684,000)

= 47%

hence, the return on investment is 47%