The Southern Division of Amelia Corporation had sales of $6,500,000 and operating income of $1,200,000 last year.The total assets of the Southern Division were $3,000,000,while current liabilities were $450,000.Amelia Corporation's target rate of return is 10%,while its weighted average cost of capital is 6%.The effective tax rate for the company is 30%.
What is the Southern Division's Return on Investment (ROI)?
A)25.00%
B)6.00%
C)40.00%
D)200.00%

Question

Quizplus · Accepted Answer

C)
Return on investment = Operating income/Total assets
= 1,200,000/3,000,000 = 40%

The Southern Division of Amelia Corporation Had Sales of $6,500,000