Answer: $600,000
Explanation:
From the question, we are informed that Columbia Corp.'s required return on investment is 10%. Its West Division has revenues of $6,000,000, asset turnover of 1, and ROI of 10%. The the West Division's operating income goes thus:
Revenue= $6,000,000
Asset turnover = 1
It should be noted that assets turnover is calculated as revenue divided by total assets. This will be:
1 = 6,000,000/total asset
Total asset = 6,000,000/1
= 6,000,000
Since return on investment is 10%,
ROI = Operating income/total assets
10% = operating income/6,000,000
0.1 = operating income/6,000,000
Operating income= 6,000,000 × 0.1
Operating Income= $600,000
