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Assume Division 1 of the XYZ Company Had the Following

Question 164

Multiple Choice

Assume Division 1 of the XYZ Company had the following results last year.
 Sales $3,000,000 Operating income 500,000 Total as sets (average)  4,500,000 Current liabilities 300,000\begin{array}{|l|r|}\hline\text { Sales } & \$ 3,000,000 \\\hline \text { Operating income } & 500,000 \\\hline \text { Total as sets (average) } & 4,500,000 \\\hline \text { Current liabilities } & 300,000\\\hline\end{array}
Management's required rate of return is 8% and the weighted average cost of capital is 6%. Its effective tax rate is 30%.
-What is the division's return on investment?


A) 5%
B) 10%
C) 20%
D) 50%

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