The Dessert Division of Incredible Edibles Corporation has the following segment information: Assets available for use $1,800,000 Target rate of return 10% Residual income $ 270,000 What was Dessert Division's return on investment?
a. 15%
b. 10%
c. 25%
d. 20%
C
ROI = Income / Assets Invested
Income = Residual Income + (Target Rate * Assets)
= $270,000 + (.10 * $1,800,000)
= $450,000
ROI = $(450,000/1,800,000)
= 25%
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