Consider the following information for Haley and Morris, Inc. $\begin{array}{lrr}&\text { December } 31\&2017&2018\
\text { Total assets } & \$ 40,000,000 & \$ 50,000,000 \
\text { Noninterest-bearing current liabilities } & 800,000 & 1,400,000 \
\text { Net income } & 2,600,000 & 3,400,000 \
\text { Interest expense } & 300,000 & 400,000 \
\text { Tax rate } & 30 \% & 30 \%
\end{array}$ How much is the return on investment for 2018?
A)7.57%
B)7.24%
C)6.42%
D)7.82%

Question

Quizplus · Accepted Answer

Return on Investment (ROI) for 2018 is calculated as: $$ROI = \frac{\text{Net Income} + \text{Interest Expense} \times (1 - \text{Tax Rate})}{\text{Total Assets} - \text{Noninterest-bearing Current Liabilities}}$$ For 2018: $$ROI = \frac{3,400,000 + 400,000 \times (1 - 0.30)}{50,000,000 - 1,400,000} = \frac{3,400,000 + 280,000}{48,600,000} = \frac{3,680,000}{48,600,000} = 0.0757$$ or 7.57%.

Consider the Following Information for Haley and Morris, Inc How Much Is the Return on Investment for 2018? A)7

Consider the Following Information for Haley and Morris, Inc How Much Is the Return on Investment for 2018?
A)7