Question

Vello, Inc. Reported a return on investment of 12%, a capital turnover of 5, and income of $180,000. On the basis of this information, the company's invested capital was: A. $300,000.

Answer 1

Answer: $1,500,000

Explanation:

Return on investment = 12%

Capital turnover = 5

Income = $180,000

Invested capital =?

Return on investment = Net profit / cost of investment

Cost of Investment =Net profit / return on investment

Cost of investment = $180,000/0.12

Cost of investment = $1,500,000

Answer 2

Answer: $1,500,000

Explanation:

Vello, Inc. Reported a return on investment of 12%, a capital turnover of 5, and income of $180,000. To get the invested capital goes thus:

Formula for return income is:

= Net income /investment

We will now use the formula to compute investment .

12% =180,000/investment

Investment = 180,000/12%

= 180,000/0.12

=$ 1,500,000