Answer the Following Questions Using the Information Below:
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question 83

Multiple Choice

Answer the following questions using the information below:
The top management at Groundsource Company, a manufacturer of lawn and garden equipment, is attempting to recover from a fire that destroyed some of their accounting records. The main computer system was also severely damaged. The following information was salvaged:
$\begin{array}{lrrr}&\text { Tractor Division }& \text { Tiller Division }& \text {Digger Division }\\\text { Sales } & \$ 10,000,000 & (\mathrm{a}) & \$ 2,400,000 \\\text { Net operating income } & \$ 1,000,000 & \$ 1,440,000 & \$ 600,000 \\\text { Operating assets } & (\mathrm{b}) & (\mathrm{c}) & \$ 2,000,000 \\\text { Return on investment } & 0.20 & 0.10 & \text { (d) } \\\text { Return on sales } & (\mathrm{e}) & 0.12 & 0.25 \\\text { Investment turnover } & \text { (f) } & \text { (g) } & 1.2\end{array}$
-What is the Tractor Division's return on sales?

• A) 0.10
• B) 0.12
• C) 0.15
• D) 0.20

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Definitions:

Required Return

The minimum expected return an investor demands for investing in a particular asset, factoring in its risk.

Discount Rate

The discount rate applied in the calculation of the present value of future cash flows in a DCF analysis.

Constant Growth Rate

An assumption in certain financial models that estimates an investment's dividends or cash flows will grow at a steady, unending rate.

Constant Growth Rate

A steady rate at which a variable, such as company earnings or dividends, increases over a specific period.