Use the Following Information to Answer Question Waverly Company Has Set a Target Return on Investment (ROI)

Essay

Use the following information to answer Question. The Furniture Division of Waverly Company reports the following results for 2012: $$\begin{array} { l l } \text { Revenues } & \$ 400,000 \\\text { Operating expenses } & \$ 360,000 \\\text { Operating income } & \$ 40,000 \\\text { Operating assets } & \$ 500,000\end{array}$$
Waverly Company has set a target return on investment (ROI) of 12% for the Furniture Division.
Assume that the Furniture Division believes that it can reduce operating expenses by $25,000. If revenues and operating assets stay at the same level, what would the division's ROI be? Would it reach its target ROI?