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The current controllable margin for Henry Division is $123000. Its current operating assets are $300000. The...

The current controllable margin for Henry Division is $123000. Its current operating assets are $300000. The division is considering purchasing equipment for $90000 that will increase annual controllable margin by an estimated $5000. If the equipment is purchased, what will happen to the return on investment for Henry Division?

An increase of 4.07%

A decrease of 11.51%

A decrease of 8.18%

A decrease of 8.10%

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Answer #1
Return on investment = $123000/300000
=41%
New margin = $123000+5000
=$128000
Revised assets = $300000+90000
=$390000
Return on investment = $128000/390000
=$32.82%
Margin will decrease by =$41-32.82%
=8.18%
Correct Option :A decrease of 8.18%
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