The New Products Division of Testar Company Had Operating Income

question 106

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) 17.60%
• B) 17.90%
• C) 16.50%
• D) The answer cannot be determined using the information provided.

---

Definitions:

Contractual Relationship

A legally binding agreement between two or more parties, outlining their responsibilities and obligations.

Intellectual Property

The legal rights given to inventors and creators to protect their original works, inventions, and ideas for a certain period.

Joint Ventures

Business arrangements where two or more parties agree to pool their resources for accomplishing a specific task.

Core Capabilities

Fundamental skills, knowledge, and expertise that give an organization a competitive advantage in its field.