The Jazz Division of Heights Recording Corporation reported the following results last year: Sales $10,000,000 Operating Income $2,200,000 Total Assets $4,000,000 Current Liabilities $2,500,000 Management's target rate of return is 12% and the weighted average cost of capital is 9%. Its effective tax rate is 32%. Calculate the ROI for the Jazz Division. A. 22% B. 88% C. 12% D. 55% Did the Jazz Division earn or exceed the target rate of return? A. Yes B. No

Question

Business

Elise

15 January, 11:56

The Jazz Division of Heights Recording Corporation reported the following results last year: Sales $10,000,000 Operating Income $2,200,000 Total Assets $4,000,000 Current Liabilities $2,500,000 Management's target rate of return is 12% and the weighted average cost of capital is 9%. Its effective tax rate is 32%. Calculate the ROI for the Jazz Division. A. 22% B. 88% C. 12% D. 55% Did the Jazz Division earn or exceed the target rate of return? A. Yes B. No

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Gypsy · Answer 1

The ROI for the Jazz Division IS 55%. The right answer is D.

A. Yes

Explanation:

In order to calculate the ROI for the Jazz Division we would have to use the following formula

ROI = Operating income/Total assets

According to the given dа ta:

Operating income=$2,200,000

Total assets = $4,000,000

Therefore, ROI = $2,200,000/$4,000,000

ROI = 55%

The ROI for the Jazz Division is 55%

A. Yes. The Jazz Division earn the target rate of return