Assume the Apple division of the Gala Company had the following results last year.
$\begin{array}{|l|r|}
\hline\text { Sales } & \$ 3,000,000 \
\hline \text { Operating income } & 500,000 \
\hline \text { Total as sets (average) } & 4,500,000 \
\hline \text { Current liabilities } & 300,000\\hline
\end{array}$
Management's required rate of return is 10% and the weighted average cost of capital is 8%. Its effective tax rate is 30%.
-What is Apple division's return on investment?
A) 11.11%
B) 16.67%
C) 66.67%
D) 60.00%

Question

Assume the Apple division of the Gala Company had the following results last year.
$\begin{array}{|l|r|}
\hline\text { Sales } & \$ 3,000,000 \
\hline \text { Operating income } & 500,000 \
\hline \text { Total as sets (average) } & 4,500,000 \
\hline \text { Current liabilities } & 300,000\\hline
\end{array}$
Management's required rate of return is 10% and the weighted average cost of capital is 8%. Its effective tax rate is 30%. 
-What is Apple division's return on investment?
A) 11.11%
B) 16.67%
C) 66.67%
D) 60.00%

Quizplus · Accepted Answer

Return on Investment (ROI) is calculated as Operating Income divided by Total Assets. For the Apple division, this is $500,000 / $4,500,000 = 0.1111 or 11.11%.

Assume the Apple Division of the Gala Company Had the Following