Refer to Exhibit. Assume that you are a consultant who has been hired by Sun coast Food Centers,

Required: 

Write a memorandum to the company president explaining why the ROI based on net book value (in Exhibit) behaves as it does over the five-year time horizon.

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$500,000 Acquisition cost of equipment 5 years Useful life Salvage value at end of useful life Annual straight-line depreciation.. $100,000 $150,000 Annual income generated by asset (before deducting depreciation) ROI Average ROI Average Income Based on Gross Based on Income before Annual Net Book Net Book Book Gross Book Net of Depreciation Value* Valuet Value Value Year Depreciation Depreciation $50,000 $150,000 $100,000 $450,000 11.1% $500,000 10% 1 150,000 100,000 50,000 350,000 14.3 500,000 10 150,000 100,000 50,000 250,000 20.0 500,000 10 150,000 100,000 50,000 150,000 33.3 500,000 10 500,000 150,000 100,000 50,000 50,000 100.0 10 "Average net book value is the average of the beginning and ending balances for the year in net book value. In year 1, for example, the average net book value is $500,000 + $400,000 IROI rounded to nearest tenth of 1 percent.