Brutus is a division of Madam Medusa’s Pawn Shop/Boutique, Inc. Last year, the division generated operating income of $609,840 and sales revenue of $10,890,000. The division had invested capital of $3,000,000. Using only the information given, which of the following statements is correct?
a. For every dollar of capital invested, $0.20 of income is earned.
b. If the division's manager is evaluated based on maintaining the division's current Return on Investment, he would accept an investment opportunity that would yield a return of 18%.
c. For every dollar of capital invested, $3.63 of income is earned.
d. For every dollar of sales revenue generated, $0.56 of income is earned.
e. If the company's hurdle rate is less than 20%, the residual income for Brutus is negative.
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Brutus is a division of Madam Medusa’s Pawn Shop/Boutique, Inc. Last year, the division generated op...
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