Terra Company Has Two Divisions,the Retail Division and the Wholesale

question 3

Multiple Choice

Terra Company has two divisions,the Retail Division and the Wholesale Division.The following information was gathered for the two divisions for the current year: $\begin{array}{|l|lr|lr|}\hline & {\text { Retail Division }} & &{\text { Wholesale Division }} \\\hline \text { Operating income } & \$ & 2,500,000 & \$ & 6,000,000 \\\hline \text { Operating assets } & \$ & 16,000,000 & \$ & 36,000,000 \\\hline\end{array}$ Assuming that these are the only divisions of Terra Company,what is the ROI for the company as a whole?

• A) 15.7%
• B) 16.3%
• C) 16.6%
• D) 32.3%

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Definitions:

Risk Aversion

The tendency of individuals to prefer outcomes with lower uncertainty over outcomes with higher uncertainty, even if the latter may offer a higher expected return.

Equilibrium Premium

The price at which the supply and demand for insurance coverage balance, setting a market rate for premiums.

Equilibrium Quantity

The quantity of goods or services that is supplied and demanded at the point where the supply and demand curves intersect.

Diminishing Marginal Utility

The principle that says additional units of a good or service provide less added satisfaction than previous units.