Question

Cooper Industries wants to replace two small delivery trucks with one larger delivery truck. The old trucks are valued at $13,000 each. The new truck will cost $52,000. If Cooper’s controllable margin is $97,000 and their operating assets were valued at $580,000 before they bought the new truck, what will their new ROI be?
A: 17.5%
B: 16.0%
C: 15.3%
D: 16.7%

Answer 1

Answer:

B) 16.0%

Explanation:

The return on investment (ROI) measures the profits earned by an investor divided by the total amount invested.

cost of old trucks = $13,000 x 2 = $26,000

cost of new truck = $52,000 - $26,000 = $26,000

Cooper's controllable margin = $97,000

Assets = $580,000

assets after purchasing new truck = $580,000 + $26,000 = $606,000

ROI = $97,000 / $606,000 = 16%