Question

The current pretax income for Coretex is $75,000 (tax rate is 35%), with an average asset base of $240,000, and an expected return of 18 percent or higher. The ROI for Coretex would amount to:

A. 18.0%

B. 20.3%

C. 31.3%

D. 68.8%

Answer #1

**Answer: B. 20.3%**

**Explanation:** For calculation of ROI, we need to
divide Net Profit/Post Tax Income by Total Assets/Average Asset
Base. Average asset base is generally used since the amount of
assets in use may have changed during the period of
measurement.

a. | Pre Tax Income | 75,000 |

b. | Tax Rate | 35% |

c. | Post Tax Income | 48,750 |

d. | Average Asset Base | 2,40,000 |

e. |
ROI = (c/d)
% |
20.31% |

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