The Pasta Division of Whole Grain Corporation had sales of $5,500,000 and operating income of $1,375,000 last year.The total assets of the Pasta Division were $2,750,000,while current liabilities were $330,000.Whole Grain Corporation's target rate of return is 12%,while its weighted average cost of capital is 8%.The effective tax rate for the company is 30%.
What is the Pasta Division's Return on Investment (ROI)?

Question

Quizplus · Accepted Answer

C)
Return on investment = Operating income/Total assets
= 1,375,000/2,750,000 = 50%

The Pasta Division of Whole Grain Corporation Had Sales of $5,500,000