what happens to roi 420182

The controllable margin plus the additional income, and the average operating assets plus the new machine must be used in to determine the new ROI.

Dax Pet Foods compiled the following information for the year for its dog division

Average operating assets $3,500,000
Controllable margin 315,000

Dax’s corporate office expects the division to earn a minimum return of 8%. Suppose the dog division invests in a new machine that will produce a new dog food product. The machine is expected to generate $19,500 of controllable profit and will cost $150,000. If Dax buys the new machine, what happens to ROI?

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a.It will be 9%.

b.

It will increase to 9.16%

c.

It will become 9.6%.
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