CABLE SOURCE ACQUIRED AN ASSET WITH A VALUE OF $3000000 AND A 4 YEAR LIFE.

YEARLY CASH FLOWS ARE AS FOLLOWS

YEARL

1 1,025,000

2 1,050,000

3 1,075,000

4 1,200,000

THE COST OF THE ASSET IS EXPECTED TO INCREASE AT A RATE OF 12 PERCENT EACH YEAR

COMPOUNDED EACH YEAR.ASSET BASE IS AT END OF EACH YEAR VALUES.

A) WHAT IS THE ROI FOR THE FIRST 3YEARS OF ASSETS LIFE USING THE HISTORICAL COST, NET BOOK VALUE APPROACH?

B) WHAT IS THE ROI FOR THE FIRST 3YEARS OF THE ASSETS LIFE IF BOTH INVESTMENT BASE AND DEPRECIATION

ARE DETERMINED BY THE CURRENT COST, NET BOOK VALUE OF THE ASSET AT THE END OF EACH YEAR?