Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 21

Compute RI and ROI

TL Division of Giant Bank has assets of $14.4 billion. During the past year, the division had profits of $1.8 billion. Giant Bank has a cost of capital of 8 percent. Ignore taxes.

Required

a. Compute the divisional ROI.

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b. Compute the divisional RI.

Step 1 of 3

Given,

Divisional assets/investment of GB is $14.4 billion

After-tax income or profits of the division is $1.8 billion

Cost of capital is 8% or 0.08