The Street Division of Labrosse Logistics just started operations. It purchased depreciable assets costing $36 million and
Question:
The 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 $7.2 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 nondepreciable assets. This means that the division has invested $72 million in assets with a salvage value of $43.2 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. Compute ROI, using net book value for each year.
b. Compute ROI, using gross book value for each year.
Step by Step Answer:
Year 1 Year 2 Year 3 Year 4 a Net Book Value 12000...View the full answer
Related Video
In accounting terms, depreciation is defined as the reduction of the recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible. An example of fixed assets are buildings, furniture, office equipment, machinery, etc. The land is the only exception that cannot be depreciated as the value of land appreciates with time. Depreciation allows a portion of the cost of a fixed asset to be the revenue generated by the fixed asset. This is mandatory under the matching principle as revenues are recorded with their associated expenses in the accounting period when the asset is in use. This helps in getting a complete picture of the revenue
Students also viewed these Business questions
-
Zak Corp. purchased depreciable assets costing $600,000 on January 2, 2010. For tax purposes, the company uses CCA in a class that has a 40% rate. For financial reporting purposes, the company uses...
-
Zak Corp. purchased depreciable assets costing $600,000 on January 2, 2014. For tax purposes, the company uses CCA in a class that has a 40% rate. For financial reporting purposes, the company uses...
-
Myers Corp. purchased depreciable assets costing $30,000 on January 2, 2017. For tax purposes, the company uses CCA in a class that has a 30% rate. For financial reporting purposes, the company uses...
-
O An hair dryer is basically a duct with a fan that draws cool air from the atmosphere at one end, forces it on an electrical resistor (where the air is heated up) and discharges it at the other end....
-
Explain what orientation and training and development of employees involve.
-
According to the IMF, what are the economic growth projections for 2017 and 2018?
-
Small and medium enterprises (SMEs) have played a major role in economic growth across the globe. They are major contributors to national economies in terms of their contribution to employment,...
-
The adjusted trial balance for Turnquist Company is given in E3-13. In E3-13, the trial balances before and after adjustment for Turnquist Company at the end of its fiscal year are presented below....
-
Assuming an arbitrage-free world, today you buy a zero-coupon bond with $100 par value and 1.5 years to maturity, and your holding period is six months. Based on the information of question 21, you...
-
Sandy and John Ferguson got married eight years ago and have a seven-year-old daughter, Samantha. In 2022, Sandy worked as a computer technician at a local university, earning a salary of $152,000,...
-
Normandy Instruments invests heavily in research and development (R&D), although it must currently treat its R&D expenditures as expenses for financial accounting purposes. To encourage investment in...
-
Technology firms, pharmaceutical firms, oil and gas companies, and other ventures inevitably incur costs on unsuccessful investments in new projects (e.g., new technologies or new drugs). For oil and...
-
What is the Fed, what are its two mandated objectives, and what are some other goals?
-
A portfolio has 70% investment weight in V, and the rest 30% investment weight in W. V has the standard deviation of 10%; W has the standard deviation of 20%. V and Whave the correlation coefficient...
-
The local paper delivery person has to purchase daily newspapers prior to reselling them. Newspapers cost $0.75 each, and can be sold for $1.25 each. At the end of each day, the paper deliverer can...
-
A U.S retailer imports readymade garments worth 120 million rupees from india when the exchange rate is 60 rupees per USD. The import invoice is payable in 3 months. In three months, the exchange...
-
A 15 year annuity pays $100 per year. The interest rate is 8% per annum. If the annuity is changed to an annuity due how will its present value change?
-
The Over the Counter Bulletin Board Group of answer choices Lists only the amount of short sales in a company's stock Lists the securities of those public companies not listed on a stock exchange,...
-
Rank the following compounds in order of decreasing acidity:
-
A local politician is concerned that a program for the homeless in her city is discriminating against blacks and other minorities. The following data were taken from a random sample of black and...
-
Adriana Corporation manufactures football equipment. In planning for next year, the managers want to understand the relation between activity and overhead costs. Discussions with the plant supervisor...
-
Prepare a scattergraph based on the overhead and machine-hour data in Exercise 5-26.
-
Prepare a scattergraph based on the overhead and labor-hour data in Exercise 5-26.
-
Employee longevity A large insurance company has developed a model to identify the factors associated with employee turnover. The dependent variable is number of years an employee stays with the...
-
5. Consider the 'top-hat' function which is zero everywhere except between -1 and 1 where it takes value 1. Show, using only elementary integration, that the convolution of this function with itself...
-
HERE IS THE SITUATION. With attendance plummeting by 50 percent in the past decade, a new, younger executive director was hired to reverse the trend. By understanding the importance of integrating...
Study smarter with the SolutionInn App