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 non depreciable 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. & b. Compute ROI, using net book value and gross book value for each year. Note: Enter your answers as a percentage rounded to 2 decimal places (i.e., 32.10). ROI Net Book Gross Book Value Value Year 1 % % Year 2 % % Year 3 % % Year 4 % %
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 non depreciable 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. & b. Compute ROI, using net book value and gross book value for each year. Note: Enter your answers as a percentage rounded to 2 decimal places (i.e., 32.10). ROI Net Book Gross Book Value Value Year 1 % % Year 2 % % Year 3 % % Year 4 % %
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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
non depreciable 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. & b. Compute ROI, using net book value and gross book value for each year.
Note: Enter your answers as a percentage rounded to 2 decimal places (i.e., 32.10).
ROI
Net Book
Gross Book
Value
Value
Year 1
%
%
Year 2
%
%
Year 3
%
%
Year 4
%
%
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