Asked by ?ông Ngô Trinh on Jun 24, 2024
Verified
If the company pursues the investment opportunity and otherwise performs the same as last year, the combined ROI for the entire company will be closest to:
A) 12.0%
B) 8.6%
C) 10.4%
D) 1.7%
Combined ROI
A metric that aggregates the return on investment (ROI) from multiple projects or investments to assess overall performance.
Investment Opportunity
A potential investment that could yield financial returns, often evaluated for its risk-reward profile.
Company
An organized entity formed to conduct business activities, selling goods or services in exchange for profit.
- Apprehend the influence of emerging investment opportunities on existing financial indicators.
Verified Answer
ROI for last year = ($4,000,000 - $3,200,000) / $3,200,000 = 25%
ROI for the investment opportunity = ($240,000 - $200,000) / $200,000 = 20%
Weighted average ROI = [(25% x $3,200,000) + (20% x $200,000)] / ($3,200,000 + $200,000) = 10.4%
Therefore, the closest combined ROI for the entire company is 10.4%, which is option C.
Average operating assets = $7,000,000 + $1,100,000 = $8,100,000
ROI = Net operating income ÷ Average operating assets = $838,600 ÷ $8,100,000 = 10.4%
Reference: CH10-Ref10
The Tipton Division of Dudley Company reported the following data last year:
Learning Objectives
- Apprehend the influence of emerging investment opportunities on existing financial indicators.
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