The Consumer Products Division of Weiter Corporation had average operating assets of $570,000 and net operating income of $65,100 in March. The minimum required rate of return for performance evaluation purposes is 12%.
What was the Consumer Products Division's minimum required return in March?
Required Rate of Return:
The required rate of return shows the amount of return earned by the investor for every $1 of investment made. This minimum required return is the amount of income needed so that the investor is willing to invest.
Answer and Explanation:
Let us compute the minimum required return. The formula is:
- Minimum required return = Average operating assets x Minimum required rate of return
- Minimum required return = $570,000 x 12% = $68,400
The minimum required return is c) $68,400.
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from Financial Accounting: Help and ReviewChapter 1 / Lesson 31