Answer the following questions using the information below:
Cairns Company has invested $2 000 000 in a plant to make spear guns for fishing.The target operating profit desired from the plant is $300 000 annually.The company plans annual sales of 1500 spear guns at a selling price of $2000 each.
-What is the target rate of return on investment for Cairns Company?
A)15.0%
B)11.1%
C)17.6%
D)10.0%

Question

Quizplus · Accepted Answer

The target rate of return on investment is calculated as the target operating profit divided by the investment amount. Here, it's $300,000 / $2,000,000 = 0.15 or 15%.

Answer the Following Questions Using the Information Below