Question

A firm's after-tax operating income was $1,000,000 in 2016. It started the year with total capital of $8,000,000 and raised an additional $1 million of capital during the year. The additional capital raised during 2016 only started to affect the operating income in 2017. Which value best represents the return on capital for 2016

Answer 1

best represents the return on capital is 12.5 %

Step-by-step explanation:

given data

operating income = $1,000,000

total capital = $8,000,000

to find out

best represents the return

solution

we find return by given formula that is

return =
`(operating income)/(total capital)` .............1

put here value

return =
`(1,000,000)/(8,000,000l)`

return = 0.125

so best represents the return on capital is 12.5 %