Pegasus Recycling Has a Subsidiary That Recycles Yard Waste and Another

question 46

Multiple Choice

Pegasus Recycling has a subsidiary that recycles yard waste and another that recycles paper.Information related to the two subsidiaries follows. $\begin{array}{lrr}&\text { Yard Recycling}&\text { Paper Recycling }\\\text { Total assets } & \$ 8,000,000 & \$ 15,000,000 \\\text { Noninterest-bearing current liabilities } & 500,000 & 1,000,000 \\\text { Net income } & 1,500,000 & 2,600,000 \\\text { Interest expense } & 600,000 & 800,000 \\\text { Required rate of return } & 8 \% & 11 \% \\\text { Cost of capital } & 7 \% & 9 \% \\\text { Tax rate } & 30 \% & 32 \%\end{array}$ How much is the return on investment for the Paper Recycling Division?

• A)19.65%
• B)20.40%
• C)22.46%
• D)14.69%

---

Definitions:

Organizational Structure

The system of tasks, workflows, reporting relationships, and communication channels that link together diverse parts of an organization.

Specific Tasks

Particular or defined jobs or duties assigned to individuals or groups.

High Differentiation

A situation in organizations where there is a large variance in the nature of roles, responsibilities, and levels of authority.

Organizational Units

Subdivisions within an organization, defined by their specific functions, responsibilities, and roles.