Which of the following can be used to arrive at the target rate of return on investment?
A) dividing target annual operating income by invested capital
B) multiplying target annual operating income by the rate of fixed preference dividend
C) dividing invested capital by estimated dividend rate
D) multiplying earnings available to equity stakeholders by price-equity ratio

Question

Quizplus · Accepted Answer

Dividing target annual operating income by invested capital is a commonly used method to arrive at the target rate of return on investment. This calculation gives the percentage return on investment that would be required to generate the target operating income.

Which of the Following Can Be Used to Arrive at the Target