Question

Assume the Runnng Shoes division of the Shoes Corporation had the following results last year (in thousands). Management's target rate of return is 30% and the weighted average cost of capital is 15%. Its effective tax rate is 40%. Sales............................ .......$6,000,000 Operating income..................1,800,000 Total assets..................... ......1,000,000 Current liabilities.......................810,000 What is the division's Return on Investment (ROI)? (1 Point)

Answer 1

Answer: 180%

Explanation:

Return on investment = (operating income/sales) x (sales/total assets)

=>  operating income / total assets

given Operating income=1,800,000

Total assets.1,000,000

Current liabilities.=810,000

Return on investment=1,800,000/1,000,00=1.8 X 100= 180%