Bryan Manufacturing had sales of $4 000 000 and net operating income of $700 000.Operating assets during the year averaged $600 000.The manager of Hardcastle is considering the purchase of a new machine which is expected to increase average operating assets by 8 per cent.If the new machine is purchased,the company's new return on investment (ROI)would be:
A) 126.0 per cent
B) 16.2 per cent
C) 108.0 per cent
D) 92.6 per cent

Question

Quizplus · Accepted Answer

ROI = Net Operating Income / Average Operating Assets
ROI before the purchase = $700 000 / $600 000 = 116.7%
ROI after the purchase = $700 000 / ($600 000 * 1.08) = 108.0%
Therefore, the new ROI would be 108.0%, which is option C.

Bryan Manufacturing Had Sales of $4 000 000 and Net