Question

The west division of sunset corporation had sales of $70,000,000 and operating income of $500,000 last year. the total assets of the west division were $1,000,000, while current liabilities were $450,000. sunset corporation's target rate of return is 14%, while its weighted average cost of capital is 9%. the effective tax rate for the company is 20%. what is the west division's return on investment (rol)?

a. 50%
b. 200%
c. 45%
d. 1%

Answer 1

The west division's return on investment (ROI) is 50%. the correct answer option (a).

Step-by-step explanation:

The Return on Investment (ROI) is a measure used to evaluate the profitability of an investment. It is calculated by dividing the operating income by the total assets of a division or company.

To calculate the ROI of the west division of Sunset Corporation, we need to divide the operating income of $500,000 by the total assets of $1,000,000. The result is 0.5 or 50%.

So, the west division's return on investment (ROI) is 50%.

To calculate the return on investment (ROI) for the West division of Sunset Corporation, we need to use the formula for ROI, which is: ROI = Operating Income / Total Assets.

From the question, we know that the West division had an operating income of $500,000 and total assets of $1,000,000.

By plugging these values into the ROI formula, we get ROI = $500,000 / $1,000,000, which simplifies to an ROI of 0.5 or 50%. Therefore, the West division's return on investment is 50%, making the correct answer option (a).