The Box Manufacturing Division of the Allied Paper Company reported the following results from the past year. Shareholders require a return of 7%. Management calculated a weighted-average cost of capital (WACC) of 5%
Allied's corporate tax rate is 30%.
Sales $700,000
Operating income $175,000
Total assets $1,500000
Current liabilities 600,000
What is the division's sales margin?
A) 25.00%
B) 46.67%
C) 11.67%
D) 40.00%
A
Explanation: A) Operating income $175,000 / Sales $700,000 = 25%
Business
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