Global Electronics Company The Computer Division of Global Electronics Company had the following financial data for the year:
Refer to Global Electronics Company.If the manager of the Computer Division is evaluated based on return on investment,how much would she be willing to pay for an investment that promises to increase net segment income by $50,000?
A)$ 50,000
B)$ 333,333
C)$1,000,000
D)$ 500,000

Question

Global Electronics Company The Computer Division of Global Electronics Company had the following financial data for the year:
 Refer to Global Electronics Company.If the manager of the Computer Division is evaluated based on return on investment,how much would she be willing to pay for an investment that promises to increase net segment income by $50,000?
A)$ 50,000 
B)$ 333,333 
C)$1,000,000 
D)$ 500,000

Quizplus · Accepted Answer

To calculate the return on investment (ROI), we divide the net segment income by the total assets:

ROI = Net Segment Income / Total Assets

ROI = $400,000 / $6,000,000

ROI = 0.067 or 6.7%

If the manager wants to increase net segment income by $50,000, we can calculate how much additional investment is needed:

Additional Investment = Desired Income Increase / ROI

Additional Investment = $50,000 / 0.067

Additional Investment = $746,268.66

Therefore, the manager would be willing to pay up to $746,268.66 for an investment that promises to increase net segment income by $50,000. Since there is no option that matches this exact amount, the closest answer is B) $333,333.

Global Electronics Company the Computer Division of Global Electronics Company