Robichau Inc. reported the following results from last year's operations: At the beginning of this year, the company has a $900,000 investment opportunity with the following characteristics:
The company's minimum required rate of return is 20%.
If the company pursues the investment opportunity and otherwise performs the same as last year, the combined ROI for the entire company will be closest to:
A) 3.9%
B) 24.0%
C) 14.5%
D) 18.5%

Question

Robichau Inc. reported the following results from last year's operations:  At the beginning of this year, the company has a $900,000 investment opportunity with the following characteristics:
 The company's minimum required rate of return is 20%.
If the company pursues the investment opportunity and otherwise performs the same as last year, the combined ROI for the entire company will be closest to:
A) 3.9% 
B) 24.0% 
C) 14.5% 
D) 18.5%

Quizplus · Accepted Answer

11eacbfc_c519_54ab_8ffe_6d375183a0a7_TB7552_00 Net operating income = $567,000 + $153,000 = $720,000
Average operating assets = $3,000,000 + $900,000 = $3,900,000
ROI = Net operating income ÷ Average operating assets = $720,000 ÷ $3,900,000 = 18.5%