Asked by Jordan Ratliff on Apr 29, 2024
Verified
If the company pursues the investment opportunity and otherwise performs the same as last year, the combined ROI for the entire company will be closest to:
A) 14.4%
B) 2.7%
C) 11.7%
D) 18.8%
Combined ROI
A metric that aggregates the return on investment from multiple projects or business units into a single figure.
Investment Opportunity
A situation where funds can be placed in a venture with the expectation of earning a return on the investment.
- Gain insight into the impact of novel investment opportunities on established financial metrics.
Verified Answer
ZK
Zybrea Knight
May 04, 2024
Final Answer :
A
Explanation :
To calculate the combined ROI for the entire company, we need to use the formula:
Combined ROI = (Total Net Income / Total Investment) x 100
Last year, the company had a net income of $1,080,000 and an investment of $9,000,000, so the ROI was:
ROI = (1,080,000 / 9,000,000) x 100 = 12%
If the company pursues the investment opportunity, they will have an additional net income of $360,000 and an additional investment of $2,500,000. So, the total net income and total investment will be:
Total Net Income = 1,080,000 + 360,000 = 1,440,000
Total Investment = 9,000,000 + 2,500,000 = 11,500,000
Using the formula, the combined ROI will be:
Combined ROI = (1,440,000 / 11,500,000) x 100 = 12.52%
Therefore, the closest answer is A) 14.4%.
Combined ROI = (Total Net Income / Total Investment) x 100
Last year, the company had a net income of $1,080,000 and an investment of $9,000,000, so the ROI was:
ROI = (1,080,000 / 9,000,000) x 100 = 12%
If the company pursues the investment opportunity, they will have an additional net income of $360,000 and an additional investment of $2,500,000. So, the total net income and total investment will be:
Total Net Income = 1,080,000 + 360,000 = 1,440,000
Total Investment = 9,000,000 + 2,500,000 = 11,500,000
Using the formula, the combined ROI will be:
Combined ROI = (1,440,000 / 11,500,000) x 100 = 12.52%
Therefore, the closest answer is A) 14.4%.
Explanation :
Net operating income = $456,000 + $107,100 = $563,100
Average operating assets = $3,000,000 + $900,000 = $3,900,000
ROI = Net operating income ÷ Average operating assets = $563,100 ÷ $3,900,000 = 14.4%
Reference: CH10-Ref5
Weafer Inc.reported the following results from last year's operations:![Net operating income = $456,000 + $107,100 = $563,100 Average operating assets = $3,000,000 + $900,000 = $3,900,000 ROI = Net operating income ÷ Average operating assets = $563,100 ÷ $3,900,000 = 14.4% Reference: CH10-Ref5 Weafer Inc.reported the following results from last year's operations:](https://d2lvgg3v3hfg70.cloudfront.net/TB2627/11ea7998_5c8d_37ca_911b_099b0ec0ef20_TB2627_00_TB2627_00.jpg)
![Net operating income = $456,000 + $107,100 = $563,100 Average operating assets = $3,000,000 + $900,000 = $3,900,000 ROI = Net operating income ÷ Average operating assets = $563,100 ÷ $3,900,000 = 14.4% Reference: CH10-Ref5 Weafer Inc.reported the following results from last year's operations:](https://d2lvgg3v3hfg70.cloudfront.net/TB2627/11ea7998_5c8d_10b9_911b_2f9e6494b94b_TB2627_00_TB2627_00.jpg)
Average operating assets = $3,000,000 + $900,000 = $3,900,000
ROI = Net operating income ÷ Average operating assets = $563,100 ÷ $3,900,000 = 14.4%
Reference: CH10-Ref5
Weafer Inc.reported the following results from last year's operations:
![Net operating income = $456,000 + $107,100 = $563,100 Average operating assets = $3,000,000 + $900,000 = $3,900,000 ROI = Net operating income ÷ Average operating assets = $563,100 ÷ $3,900,000 = 14.4% Reference: CH10-Ref5 Weafer Inc.reported the following results from last year's operations:](https://d2lvgg3v3hfg70.cloudfront.net/TB2627/11ea7998_5c8d_37ca_911b_099b0ec0ef20_TB2627_00_TB2627_00.jpg)
Learning Objectives
- Gain insight into the impact of novel investment opportunities on established financial metrics.
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