Assume the Cell Phone Division of the First Electronics Corporation

question 134

Multiple Choice

Assume the Cell Phone Division of the First Electronics Corporation had the following results last year (in thousands) .Management's target rate of return is 10% and the weighted average cost of capital is 7%.Its effective tax rate is 30%. $$\begin{array} { | l | r | } \hline \text { Sales } & \$ 6,000,000 \\\hline \text { Operating income } & 900,000 \\\hline \text { Total assets } & 3,000,000 \\\hline \text { Current liabilities } & 750,000 \\\hline\end{array}$$
- What is the division's Return on Investment (ROI) ?

• A)15.00%
• B)25.00%
• C)30.00%
• D)200.00%

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Definitions:

Multiple-Step

An income statement format that separates operating revenues and expenses from non-operating activities, providing a detailed view of a company's financial performance.

Periodic Inventory System

An inventory accounting system where updates to inventory levels are made on a periodic basis rather than continuously.

Perpetual Inventory System

An accounting method that records inventory purchases and sales in real-time, providing a continuous account of inventory balances.