Align Division Is One of the Divisions of DynaCore

question 127

Multiple Choice

Align Division is one of the divisions of DynaCore.Align's invested capital is $420,000.Last year, Align generated NOPAT of $64,260 on sales of $756,000.Which one of the following correctly calculates Align Division's return on investment using the two components of return on investment?

• A)$64,260 ÷ $756,000
• B)11.76% × 0.56
• C)$4,260 ÷ $756,000
• D)8.5% × 1.80

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Definitions:

Shareholder Basis

The amount invested in a company by its shareholders plus any earnings retained by the company.

Earnings and Profits

A measure used for tax purposes, representing a corporation's net income plus or minus certain tax-preferred items.

Cash Dividend

A payment made by a corporation to its shareholders, usually in cash, out of its profits or reserves.

Basis

The amount of investment in property for tax purposes, used to calculate gain or loss upon sale or disposition of the property.