The Street Division of Labrosse Logistics just started operations. It purchased depreciable assets costing $$47$ million and having a four$-$year expected life, after which the assets can be salvaged for $$9\mathrm{.}4$ million. In addition, the division has $$47$ million in assets that are not depreciable. After four years, the division will have $$47$ million available from these nondepreciable assets. This means that the division has invested $$94$ million in assets with a salvage value of $$56\mathrm{.}4$ million. Annual operating cash flows are $$18$ million. In computing ROI, this division uses$$end$-$of$-$year$$asset values in the denominator. Depreciation is computed on a straight$-$line basis, recognizing the salvage values noted. Ignore taxes.

Assume that the company uses an $11$ percent cost of capital.

Required:

Compute residual income, using net book value for each year.

Compute residual income, using gross book value for each yearThe Street Division of Labrosse Logistics just started operations. It purchased depreciable assets costing $$36$ million and having a four$-$year expected life, after which the assets can be salvaged for $$7\mathrm{.}2$ million. In addition, the division has $$36$ million in assets that are not depreciable. After four years, the division will have $$36$ million available from these non depreciable assets. This means that the division has invested $$72$ million in assets with a salvage value of $$43\mathrm{.}2$ million. Annual operating cash flows are $$12$ million. In computing ROI, this division uses end$-$of$-$year asset values in the denominator. Depreciation is computed on a straight$-$line basis, recognizing the salvage values noted. Ignore taxes.

Required:

a$.$ & b$.$ Compute ROI, using net book value and gross book value for each year.