Alpha Division had the following information: Suppose the asset base is decreased by $200,000,with no other changes.What would be the return on investment of Alpha Division?
$$\begin{array} { l r }
\text { Asset base in Alpha Division } & \$ 800,000 \
\text { Net income in Alpha Division } & \$ 100,000 \
\text { Cost of capital } & 12 \% \
\text { Target ROI } & 15 \% \
\text { Margin for Alpha Division } & 20 \%
\end{array}$$
A)16.7%
B)62.5%
C)100.0%
D)600.0%

Question

Alpha Division had the following information: Suppose the asset base is decreased by $200,000,with no other changes.What would be the return on investment of Alpha Division?
$$\begin{array} { l r } 
\text { Asset base in Alpha Division } & \$ 800,000 \
\text { Net income in Alpha Division } & \$ 100,000 \
\text { Cost of capital } & 12 \% \
\text { Target ROI } & 15 \% \
\text { Margin for Alpha Division } & 20 \%
\end{array}$$
A)16.7%
B)62.5%
C)100.0%
D)600.0%

Quizplus · Accepted Answer

The return on investment (ROI) is calculated as Net Income / Asset Base. Initially, ROI = $100,000 / $800,000 = 12.5%. After decreasing the asset base by $200,000, the new asset base is $600,000. The new ROI = $100,000 / $600,000 = 16.7%.

Alpha Division Had the Following Information: Suppose the Asset Base