Herring Corporation Has Operating Income of $225,000 and a 40

question 21

Multiple Choice

Herring Corporation has operating income of $225,000 and a 40% tax rate.The firm has short-term debt of $120,000,long-term debt of $330,000,and common equity of $450,000.What is its return on invested capital?

• A)13.75%
• B)14.33%
• C)15.00%
• D)16.25%
• E)17.10%

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Definitions:

Corporation

A legal entity that is separate from its owners, endowed with rights and responsibilities, and capable of conducting business.

Preferred Shareholders

Investors who own preferred shares in a company, giving them priority over common shareholders in the distribution of dividends and assets.

Vote

The act of making a choice in an election or decision-making process.

Financing Corporation

A company that provides money to individuals or businesses for the purpose of investment or purchase, expecting repayment usually with interest.