Assume the Hiking Shoes division of the All About Shoes Corporation had the following results last year (in thousands). Management's target rate of return is 30% and the weighted average cost of capital is 15%. Its effective tax rate is 40%. Sales $6,000,000 Operating income 1,800,000 Total assets 1,000,000 Current liabilities 810,000 What is the division's Return on Investment (ROI) ?

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Business

Alfonso Garcia

7 April, 01:40

Assume the Hiking Shoes division of the All About Shoes Corporation had the following results last year (in thousands). Management's target rate of return is 30% and the weighted average cost of capital is 15%. Its effective tax rate is 40%. Sales $6,000,000 Operating income 1,800,000 Total assets 1,000,000 Current liabilities 810,000 What is the division's Return on Investment (ROI) ?

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Trevon Mora · Answer 1

The division's Return on Investment (ROI) is 180%

Explanation:

The computation of the return on investment is shown below:

= (Operating income) : (total assets) * 100

= ($ 1,800,000) : ($1,000,000) * 100

= 180%

The return on investment shows a relationship between the operating income and the total assets / investment.

The other information which is given in the question is not consider in the computation part. Hence, ignored it