Question

Cabal Products is a division of a major corporation. Last year the division had total sales of $11,650,000, net operating income of $1,141,700, and average operating assets of $3,495,000. The company's minimum required rate of return is 11%. The division's return on investment (ROI) is closest to: 9.8% 32.7% 89.1% 30.0%

Answer 1

Hence, The division's return on investment (ROI) is closest to 32.7%

Step-by-step explanation:

Return on Investment : It show a ratio between net operating income and average operating assets so that company get to know how much the return is available during a period.

The formula to compute return on investment is shown below:

= Net operating income ÷ Average operating assets

= $1,141,700 ÷ $3,495,000

= 32.7%

Since the total sales and require rate of return is irrelevant while computing the ROI. So, it would not be considered in computation part.

Hence, The division's return on investment (ROI) is closest to 32.7%