The Ste. Marie Division of Pacific Media Corporation just started operations. It purchased depreciable assets costing $45 million and having a four-year expected life, after which the assets can be salvaged for $9 million. In addition, the division has $45 million in assets that are not depreciable. After four years, the division will have $45 million available from these nondepreciable assets. This means that the division has invested $90 million in assets with a salvage value of $54 million. Annual depreciation is $9 million. Annual operating cash flows are $20 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. (Enter your answers as a percentage rounded to 1 decimal place (i.e., 32.1).) Year 1 Year 2 Year 3 Year 4 ROI Net Book Value Gross Book Value % % % % % % % %

FINANCIAL ACCOUNTING
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Author:Libby
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Chapter1: Financial Statements And Business Decisions
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The Ste. Marie Division of Pacific Media Corporation just started operations. It purchased depreciable
assets costing $45 million and having a four-year expected life, after which the assets can be salvaged
for $9 million. In addition, the division has $45 million in assets that are not depreciable. After four
years, the division will have $45 million available from these nondepreciable assets. This means that
the division has invested $90 million in assets with a salvage value of $54 million. Annual depreciation
is $9 million. Annual operating cash flows are $20 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. (Enter your answers
as a percentage rounded to 1 decimal place (i.e., 32.1).)
Year 1
Year 2
Year 3
Year 4
ROI
Net Book Value Gross Book Value
%
%
%
%
%
%
%
%
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Transcribed Image Text:The Ste. Marie Division of Pacific Media Corporation just started operations. It purchased depreciable assets costing $45 million and having a four-year expected life, after which the assets can be salvaged for $9 million. In addition, the division has $45 million in assets that are not depreciable. After four years, the division will have $45 million available from these nondepreciable assets. This means that the division has invested $90 million in assets with a salvage value of $54 million. Annual depreciation is $9 million. Annual operating cash flows are $20 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. (Enter your answers as a percentage rounded to 1 decimal place (i.e., 32.1).) Year 1 Year 2 Year 3 Year 4 ROI Net Book Value Gross Book Value % % % % % % % % < Prev 15 of 17 HH H Next > acer
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