Question
Hoffman Ceramics, a division of Kerwin Corporation, has an operating income of $78,000 and total assets of $416,000. The required rate of return for
Hoffman Ceramics, a division of Kerwin Corporation, has an operating income of $78,000 and total assets of $416,000. The required rate of return for the company is 13%. The company is evaluating whether it should use return on investment (ROI) or residual income (RI) as a measurement of performance for its division managers. The manager of Hoffman Ceramics has the opportunity to undertake a new project that will require an investment of $104,000. This investment would earn $15,600 for the company. Read the requirements. Requirement 1. What is the original return on investment (ROI) for Hoffman Ceramics (before making any additional investment)? First determine the formula to calculate the ROI. ROI
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