The income statement for the Commercial Construction Division of the Kenyon Company is as follows: $\begin{array}{lr}
\text { Sales } & \$ 272,000 \
\text { Operating expenses } & \underline{132,000} \
\text { Net operating income } & 140,000 \
\text { Interest expense } & 20,000 \
\text { Earnings before taxes } & 120,000 \
\text { Income tax expense }(30 \%) & 36,000 \
\text { Net income } & \$ 84,000
\end{array}$ If this division's invested capital is $500,000, how much is its return on investment?

Question

Quizplus · Accepted Answer

The return on investment is calculated by dividing the net income by the invested capital. In this case, the net income is $84,000 and the invested capital is $500,000, so the return on investment is $84,000 / $500,000 = 16.8%.

The Income Statement for the Commercial Construction Division of the Kenyon