The New Products Division of Testar Company Has Developed a Potential

question 40

Multiple Choice

The New Products Division of Testar Company 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.Which of the following statements is accurate?

• A) The new product is acceptable because it will yield an ROI that is higher than the target ROI and will yield residual income of $40,000.
• B) The new product will yield residual income of $45,000.
• C) The new product will decrease the companywide ROI.
• D) The new product is unacceptable because it will yield an ROI that is lower than the target ROI.

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Definitions:

North America

A continent located in the northern hemisphere and almost entirely within the western hemisphere, comprising countries such as the United States, Canada, and Mexico.

Technological Advances

Progress or development in technology, leading to the creation of new tools, systems, or methods of operation that improve efficiency, productivity, or quality of life.

Food Production

The processes involved in creating food products, from raw material acquisition to processing, distribution, and consumption.

Welfare Programs

Government-provided programs designed to support the well-being of the population by ensuring access to basic needs such as health care, food, and housing.