Question

A division of a manufacturing company has a return on investment of 24%. The division has an opportunity to accept a project that is expected to earn a return on investment of 22%. The company’s hurdle rate is 20% which of the following statements is true?
a) A division reports the following figures: Profit margin =20% Investment turnover = 0.5. The division return on investment is
b) If a company has $2,000,000 invested in buildings, equipment, and other assets and desires to earn a return on investment of 30%, the company will need to earn a net income of $ .

Answer 1

Answer:

Return on Investment

The statement that is true is:

b) If a company has $2,000,000 invested in buildings, equipment, and other assets and desires to earn a return on investment of 30%, the company will need to earn a net income of $600,000 (30% of $2,000,000).

Explanation:

The company's Return on Investment is a financial performance measure that calculates the efficiency of the use of investment resources by dividing the returns generated by an investment by the cost of the investment during a period of time.  It can be used to evaluate a divisional manager's performance based on the returns generated from the investments made in the division.