Use the Information Below to Answer the Following Question(s)

question 188

Multiple Choice

Use the information below to answer the following question(s) :
The Beverage Division of Natural Foods Corporation had sales of $4,200,000 and operating income of $840,000 last year. The total assets of the Beverage Division were $1,680,000, while current liabilities were $360,000. Natural Foods Corporation's target rate of return is 9%, while its weighted average cost of capital is 7%. The effective tax rate for the company is 40%.
-What is the Beverage Division's profit margin?

• A) 250.00%
• B) 50.00%
• C) 20.00%
• D) 8.57%

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Definitions:

Convertible Debt

A type of investment or loan that can be converted into equity, or shares, of the borrowing company under certain conditions, often used by startups.

Valuation

The process of determining the present value of an asset or a company.

Venture Capitalist Funds

Funds pooled from investors for the purpose of investing in startup companies and small businesses with the potential for long-term growth.

Professional Investor

An individual or entity that invests in various financial instruments or assets as a primary occupation, often with considerable experience and resources.