Marcia Consumer Products Has Several Divisions, Including the Education Division

question 72

True/False

Marcia Consumer Products has several divisions, including the Education Division and the Recreation Division. Data on the two divisions are shown here:
$\begin{array}{|l|r|r|} \hline& \text { Education Division } & \text { Recreation Division } \\\hline \text { Current ROI } & 9.2 \% & 10.0 \% \\\hline \text { Current WACC } & 8.0 \% & 8.0 \% \\\hline \text { Operating income } & \$ 110,009 & \$ 200,000 \\\hline \text { Effective tax rate } & 20.0 \% & 20.0 \% \\\hline \text { Average total assets } & \$ 1,200,009 & \$ 2,000,000 \\\hline \text { Current liabilities } & \$ 30,000 & \$ 30,000\\\hline\end{array}$
These data show that the Recreation Division has generated returns in excess of those expected by the investors and creditors, but the Education Division has not.

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