St John's Division Has a Required Rate of Return of 15

question 59

Multiple Choice

St. John's Division has a required rate of return of 15%. The weighted average cost of capital is 10%. Information for St. John's Divisions operations over the past 2 years follows: 20x5 20x4
Current assets $120,000 $100,000
Property, plant and equipment (cost) 300,000 280,000
Accumulated amortization 80,000 60,000
Current liabilities 90,000 70,000
Long-term debt 85,000 80,000
Pretax operating income 52,800 48,900
Income tax rate 30% 30%
What was the St. John's Division ROI for 20x5 (rounded to nearest 0.1%) ?

• A)11.2%
• B)13.2%
• C)15.5%
• D)16.0%

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