Exercise 14-43 (Algo) Impact of an Asset Disposal on Performance Measures (LO 14-2, 3)Veach Division has total assets (net of accumulated depreciation) of $462,000 at the beginning of year 1. One of the assets is amachine that has a net book value of $43,260. Expected divisional income in year 1 is $55,440 including $2,940 in income generatedby the machine (after depreciation). Veach's cost of capital is 10 percent. Veach is considering disposing of the asset today (thebeginning of year 1).Required:a. Veach computes ROI using beginning-of-the-year net assets. What will the divisional ROI be for year 1 assuming Veach retains theasset?b. What would divisional ROI be for year 1 assuming Veach disposes of the asset for its book value and there is no gain or loss on thesale?Note: Enter your answer as a percentage rounded to 1 decimal place (i.e., 32.1).c. Veach computes residual income using beginning-of-the-year net assets. What will the divisional residual income be for year 1assuming Veach retains the asset?d. What would divisional residual income be for year 1 assuming Veach disposes of the asset for its book value and there is no gain orloss on the sale?a. ROI before disposalb. ROI after disposalc. Residual income before disposald. Residual income after disposal%%< Prev5 of 10HHNext

ROI which stands for return on investments is the measure to determine the return generated on the…

Answered: a. ROI before disposal b. ROI after…

a. ROI before disposal b. ROI after disposal c. Residual income before disposal d. Residual income after disposal % do do %

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Concept explainers

Manufacturing Costs

Manufacturing cost is the total cost of procuring or producing a product. In other words, the manufacturing cost is the cost that an individual or business owner undertakes for the manufacturing of goods.

Question

100%

Exercise 14-43 (Algo) Impact of an Asset Disposal on Performance Measures (LO 14-2, 3)
Veach Division has total assets (net of accumulated depreciation) of $462,000 at the beginning of year 1. One of the assets is a
machine that has a net book value of $43,260. Expected divisional income in year 1 is $55,440 including $2,940 in income generated
by the machine (after depreciation). Veach's cost of capital is 10 percent. Veach is considering disposing of the asset today (the
beginning of year 1).
Required:
a. Veach computes ROI using beginning-of-the-year net assets. What will the divisional ROI be for year 1 assuming Veach retains the
asset?
b. What would divisional ROI be for year 1 assuming Veach disposes of the asset for its book value and there is no gain or loss on the
sale?
Note: Enter your answer as a percentage rounded to 1 decimal place (i.e., 32.1).
c. Veach computes residual income using beginning-of-the-year net assets. What will the divisional residual income be for year 1
assuming Veach retains the asset?
d. What would divisional residual income be for year 1 assuming Veach disposes of the asset for its book value and there is no gain or
loss on the sale?
a. ROI before disposal
b. ROI after disposal
c. Residual income before disposal
d. Residual income after disposal
%
%
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