The New Products Division,of Testar Company,had Operating Income of $8,000,000

question 28

Multiple Choice

The New Products Division,of Testar Company,had operating income of $8,000,000 and operating assets of $44,800,000 during the current year.The New Products Division has developed a potential new product that would require $8,500,000 in operating assets and would be expected to provide $1,400,000 in operating income each year.Testar has set a target return on investment (ROI) of 16% for each of its divisions.Assuming that the new product is put into production,calculate the division's ROI.

• A) 17.6%
• B) 17.9%
• C) 16.5%
• D) The answer cannot be determined using the information provided.

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Definitions:

Isocost

A line that represents all combinations of inputs which have the same total cost for a firm, used in production theory to analyze cost minimization.

Price Of Labor

The wage rate or salary that employers pay to employees in exchange for their work.

Isocost

A line that represents all the combinations of inputs that have the same total cost.

Price Of Labor

The compensation (wages, salaries, and benefits) paid to employees for their work or services.