Question

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)?

Answer 1

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

Step-by-step 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