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11 December, 16:50

The current income of an investment center is $42,000. Its current invested capital is $280,000. If the sales margin is increased to 8% and the capital turnover remains constant at 3, what will be the investment center's new return on investment (ROI) ?

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  1. 11 December, 20:04
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    24%

    Explanation:

    Data provided:

    Current income of the company = $ 42,000

    Current invested capital = $ 280,000

    sales margin = 8%

    capital turnover = 3

    thus,

    sales = capital invested * capital turnover

    or

    sales = $ 280,000 * 3 = $ 840,000

    Thus,

    the new sales margin = 8 % of the sales = 0.08 * $ 840,000 = $ 67,200

    therefore,

    the return on investment = (new sales margin / Amount invested) * 100%

    or

    the return on investment = ($ 67,200 / $ 280,000) * 100% = 24%
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