EXERCISE 12-17 (20 MINUTES)

4. Interest is a financing expense and thus it is not used to compute net

operating income.

$380,000 $4,000,000

ROI = ×

$4,000,000 $2,500,000

= 9.5% × 1.6 = 15.2%

(Increase) (Decrease) (Decrease)

Problem 12-27 (continued)