The New Products Division of Testar Company, Had Operating Income

question 70

Multiple Choice

The New Products Division of Testar Company, had operating income of $9,000,000 and operating assets of $45,800,000 during the current year. The New Products Division has developed a potential new product that would require $9,500,000 in operating assets and would be expected to provide $2,400,000 in operating income each year. Testar has set a target return on investment (ROI) of 19% for each of its divisions. Assuming that the new product is put into production, calculate the division's ROI.

• A) 20.61%
• B) 19.65%
• C) 25.26%
• D) The answer cannot be determined using the information provided.

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Definitions:

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