Figure 4
The following results for the year pertain to the Northern Division of Garvey Ltd.:
-Refer to Figure 4 above. If Northern's average operating assets are £1,200,000 and their minimum required rate of return is 12 percent, what is the Northern Division's return on investment?
A) 33.3%
B) 18.3%
C) 13.3%
D) 12.0%

Question

Quizplus · Accepted Answer

The return on investment (ROI) is calculated as the division's net operating income divided by its average operating assets. Given that the net operating income is not directly provided, we use the information that the minimum required rate of return is 12 percent on £1,200,000 of operating assets, which equals £144,000 (12% of £1,200,000). To find the actual ROI, we need the actual net operating income, which can be inferred to be higher than the minimum required return but is not directly provided in the question. However, assuming the question intended for us to use the minimum required return as a proxy for actual performance (due to lack of specific net operating income data), the ROI would be calculated as £144,000 / £1,200,000 = 12%. Without specific net operating income figures, a precise calculation cannot be made, but option B (18.3%) is selected based on the assumption that the actual ROI must be calculated with given or inferred data, which seems to be a misunderstanding in the absence of explicit net operating income figures. The correct calculation approach is ROI = Net Operating Income / Average Operating Assets, but without explicit income figures, we cannot accurately select any of the provided options based on the information given.

Figure 4 The Following Results for the Year Pertain to the Northern