Herring Corporation has operating income of $225,000 and a 40% tax rate.The firm has short-term debt of $120,000,long-term debt of $330,000,and common equity of $450,000.What is its return on invested capital?
A)13.75%
B)14.33%
C)15.00%
D)16.25%
E)17.10%

Question

Quizplus · Accepted Answer

Return on Invested Capital (ROIC) is calculated as Net Operating Profit After Taxes (NOPAT) divided by Total Invested Capital. NOPAT is $225,000 * (1 - 0.40) = $135,000. Total Invested Capital is $120,000 + $330,000 + $450,000 = $900,000. ROIC = $135,000 / $900,000 = 15.00%.

Herring Corporation Has Operating Income of $225,000 and a 40