Standard Media Has a Required Rate of Return of 5

question 156

Multiple Choice

Standard Media has a required rate of return of 5 percent, a cost of capital of 4 percent, and an income tax rate of 30 percent. The following information about its two divisions has been provided by management: $\begin{array}{lrr}&\text { Audio Division }&\text { Video Division }\\\hline\text { NOPAT } & \$ 1,400,000 & \$ 2,000,000 \\\text { Sales } & \$ 10,000,000 & \$ 12,500,000 \\\text { Invested capital } & \$ 15,000,000 & \$ 17,500,000\end{array}$ How much is the ROI of the Audio Division?

• A) 9.33%
• B) 66.67%
• C) 14.00%
• D) 16.00%

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Definitions:

Life Insurance Proceeds

The money paid out by an insurance company to the beneficiaries of a life insurance policy upon the policyholder's death.

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Periods when the market experiences a decline in prices, often due to economic contractions or negative investor sentiment.

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Attempts by a company or individual to gain control of another company by purchasing a significant share of its stock to obtain a majority stake.

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