The following information is reported for the current year for North Atlantic Division of XT Enterprises: Sales
Interest expense
Net income
Total assets
Noninterest-bearing current liabilities
Cost of capital
Required rate of return
Tax rate
$$\begin{array} { r }
\$ 3,800,000 \
\$ 250,000 \
\$ 500,000 \
\$ 5,000,000 \
\$ 400,000 \
8 \% \
14 \% \
30 \%
\end{array}$$ How much is the division's invested capital?
A)$5,000,000
B)$5,400,000
C)$5,500,000
D)$4,600,000

Question

The following information is reported for the current year for North Atlantic Division of XT Enterprises: Sales
Interest expense
Net income
Total assets
Noninterest-bearing current liabilities
Cost of capital
Required rate of return
Tax rate
$$\begin{array} { r } 
\$ 3,800,000 \
\$ 250,000 \
\$ 500,000 \
\$ 5,000,000 \
\$ 400,000 \
8 \% \
14 \% \
30 \%
\end{array}$$ How much is the division's invested capital?
A)$5,000,000
B)$5,400,000
C)$5,500,000
D)$4,600,000

Quizplus · Accepted Answer

Invested capital is calculated as total assets minus noninterest-bearing current liabilities. Therefore, it's $5,000,000 (total assets) - $400,000 (noninterest-bearing current liabilities) = $4,600,000.

The Following Information Is Reported for the Current Year for North