Extreme Sports Company makes snowboards, downhill skis, cross-country skis, skateboards, surfboards, and in-line skates. The company has found it beneficial to split operations into two divisions based on the climate required for the sport: Snow sports and Non-snow sports. The following divisional information is available for the past year:

Extreme€™s management has specified a 16% target rate of return. The company€™s weighted average cost of capital (WACC) is 10% and its effective tax rate is 38%.
Requirement
1. Calculate each division€™s profit margin. Interpret yourresults.

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Average Total Assets Operating Income Current Liabilities Sales ROI 20.8% 21.3% Snow sports Non-snow sports $ 5,500,000 8,400,000 935,000 $ 4,500,000 $ 420,000 6,700,000 1,428,000 695,000