Alpha Division
Alpha Division had the following information: $$\begin{array} { l l }
\text { Asset base in Alpha Division } & \$ 800,000 \
\text { Net income in Alpha Division } & \$ 100,000 \
\text { Cost of capital } & 12 \% \
\text { Target ROI } & 15 \% \
\text { Margin for Alpha Division } & 20 \%
\end{array}$$
-Refer to Alpha Division. Suppose the asset base is decreased by $200,000, with no other changes. What would be the return on investment?
A) 16.7%
B) 62.5%
C) 100.0%
D) 600.0%

Question

Alpha Division
Alpha Division had the following information: $$\begin{array} { l l } 
\text { Asset base in Alpha Division } & \$ 800,000 \
\text { Net income in Alpha Division } & \$ 100,000 \
\text { Cost of capital } & 12 \% \
\text { Target ROI } & 15 \% \
\text { Margin for Alpha Division } & 20 \%
\end{array}$$
-Refer to Alpha Division. Suppose the asset base is decreased by $200,000, with no other changes. What would be the return on investment?
A) 16.7%
B) 62.5%
C) 100.0%
D) 600.0%

Quizplus · Accepted Answer

The return on investment (ROI) is calculated as Net Income divided by the Asset Base. With the asset base decreased to $600,000 ($800,000 - $200,000), the ROI is $100,000 / $600,000 = 16.7%.

Alpha Division Alpha Division Had the Following Information -Refer to Alpha Division

Alpha Division
Alpha Division Had the Following Information -Refer to Alpha Division