Real Wood Structures Company Has Invested $1,040,000 in a Plant

question 136

Multiple Choice

Real Wood Structures Company has invested $1,040,000 in a plant to build small tool sheds. The target operating income desired from the plant is $156,000 annually. The company plans annual sales of 1200 sheds at a selling price of $1100 each.
What is the target rate of return on investment for Real Wood Structures Company?

• A) 18.0%
• B) 15.0%
• C) 11.8%
• D) 85.0%

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Definitions:

Equity Ratios

Equity ratios measure a company's financial leverage and are calculated by dividing total equity by total assets.

Debt-to-Equity Ratios

A financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets.

Capital Structures

The particular combination of debt and equity used by firms to finance their overall operations and growth.

Recapitalization

The process of restructuring a company's capital structure by exchanging one form of financing for another, such as debt for equity.