The 2014 income statement for the East Division of Procter Wells Company is as follows: \[\begin{array} { l r } \text { Sales } & \$ 1,800,000 \\ \text { Operating expenses } & 1,380,000 \\ \text { Net operating income } & 420,000 \\ \text { Interest expense } & 120,000 \\ \text { Earnings before taxes } & 300,000 \\ \text { Income tax expense } ( 40 \% ) & 120,000 \\ \text { Net income } & \$ 180,000 \\ \hline \end{array}\] This division's invested capital is $4,000,000. How much is the East Division's return on investment?

A) 6.3% B) 5.7% C) 10.5% D) 7.5% A) 6.3% B) 5.7% C) 10.5% D) 7.5%

Exam 12: Decentralization and Performance Evaluation

(Multiple Choice)

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