Question

Two investment centers at Marshman Corporation have the following current-year income and asset data: Investment Center A Investment Center B Investment center income $ 470,000 $ 590,800 Investment center average invested assets $ 2,560,000 $ 2,110,000 The return on investment (ROI) for Investment Center B is:

Answer 1

28 %

Step-by-step explanation:

The Return On Investment (ROI) is synonymous with the Accounting Rate of Return (ARR). Where the ARR is focused on future estimates (an e ante measure), ROI is focused on historic after the event (ex post) performance measure.

Return On Investment (ROI) = Divisional Profit Contribution / Assets employed in the division x 100

therefore,

Investment Center B

Return On Investment (ROI) = $ 590,800 / $ 2,110,000 x 100

= 28 %

The return on investment (ROI) for Investment Center B is 28 %