The Street Division of Labrosse Logistics just started operations. It purchased depreciable assets costing $36.5 million and having a four-year expected life, after which the assets can be salvaged for $7.30 million. In addition, the division has $36.5 million in assets that are not depreciable. After four years, the division will have $36.5 million available from these nondepreciable assets. This means that the division has invested $73.0 million in assets with a salvage value of $43.80 million. Annual operating cash flows are $12.5 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.
The Street Division of Labrosse Logistics just started operations. It purchased depreciable assets costing $36.5 million and having a four-year expected life, after which the assets can be salvaged for $7.30 million. In addition, the division has $36.5 million in assets that are not depreciable. After four years, the division will have $36.5 million available from these nondepreciable assets. This means that the division has invested $73.0 million in assets with a salvage value of $43.80 million. Annual operating cash flows are $12.5 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
H1.
![The Street Division of Labrosse Logistics just started operations. It purchased depreciable assets costing $36.5 million and having a
four-year expected life, after which the assets can be salvaged for $7.30 million. In addition, the division has $36.5 million in assets that
are not depreciable. After four years, the division will have $36.5 million available from these nondepreciable assets. This means that
the division has invested $73.0 million in assets with a salvage value of $43.80 million. Annual operating cash flows are $12.5 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.
In computing ROI, this division uses end-of-year asset values. Assume that all cash flows increase 10 percent at the end of each year.
This has the following effect on the assets' replacement cost and annual cash flows:
End of
Year
1
2
3
4
Depreciation is as follows.
Year
1
2
3
4
Replacement Cost
$73,000,000 × 1.1 = $80,300,000
$80,300,000 × 1.1 = $88,330,000
Etc.
For the Year
$ 8,030,000
8,833,000
9,716,300
10,687,930
Required:
11
Check my work
Annual Cash Flow
$12,500,000 × 1.1 = $13,750,000
$13,750,000 × 1.1 = $15, 125,000
Etc.
'Accumulated"
$8,030,000 (= 10% × $80,300,000)
17,666,000 (= 20% × 88,330,000)
29,148,900
42,751,720
Note that "accumulated" depreciation is 10 percent of the gross book value of depreciable assets after one year, 20 percent after two
years, and so forth.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F46e99256-23b1-4f76-abab-cc73201c4d66%2F8230e291-a399-4d3d-b36f-57c5c2e7018e%2F3oxkzmp_processed.png&w=3840&q=75)
Transcribed Image Text:The Street Division of Labrosse Logistics just started operations. It purchased depreciable assets costing $36.5 million and having a
four-year expected life, after which the assets can be salvaged for $7.30 million. In addition, the division has $36.5 million in assets that
are not depreciable. After four years, the division will have $36.5 million available from these nondepreciable assets. This means that
the division has invested $73.0 million in assets with a salvage value of $43.80 million. Annual operating cash flows are $12.5 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.
In computing ROI, this division uses end-of-year asset values. Assume that all cash flows increase 10 percent at the end of each year.
This has the following effect on the assets' replacement cost and annual cash flows:
End of
Year
1
2
3
4
Depreciation is as follows.
Year
1
2
3
4
Replacement Cost
$73,000,000 × 1.1 = $80,300,000
$80,300,000 × 1.1 = $88,330,000
Etc.
For the Year
$ 8,030,000
8,833,000
9,716,300
10,687,930
Required:
11
Check my work
Annual Cash Flow
$12,500,000 × 1.1 = $13,750,000
$13,750,000 × 1.1 = $15, 125,000
Etc.
'Accumulated"
$8,030,000 (= 10% × $80,300,000)
17,666,000 (= 20% × 88,330,000)
29,148,900
42,751,720
Note that "accumulated" depreciation is 10 percent of the gross book value of depreciable assets after one year, 20 percent after two
years, and so forth.
![Req A and B Req C and D
Complete this question by entering your answers in the tabs below.
Historical
Cost
Compute ROI using historical cost, net book value and gross book value.
Note: Enter your answers as a percentage rounded to 2 decimal place (i.e., 32.10).
Year 1
Year 2
Year 3
Year 4
Net Book
Value
6.88 X %
(7.09) X
%
(32.00) X %
%
Show Transcribed Text
Req A and B Req C and D
Current
Cost
Year 1
Year 2
Year 3
Year 4
ROI
Net Book
Value
%
%
%
%
Gross Book
Value
Complete this question by entering your answers in the tabs below.
ROI
6.12 X %
6.12 X %
%
%
Compute ROI using current cost, net book value and gross book value.
Note: Enter your answers as a percentage rounded to 2 decimal place (i.e., 32.10).
Show Transcribed Text
> Answer is not complete.
Gross Book
Value
Ć
<Req A and B
%
%
%
%
S
Req C and D >](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F46e99256-23b1-4f76-abab-cc73201c4d66%2F8230e291-a399-4d3d-b36f-57c5c2e7018e%2F28iyob_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Req A and B Req C and D
Complete this question by entering your answers in the tabs below.
Historical
Cost
Compute ROI using historical cost, net book value and gross book value.
Note: Enter your answers as a percentage rounded to 2 decimal place (i.e., 32.10).
Year 1
Year 2
Year 3
Year 4
Net Book
Value
6.88 X %
(7.09) X
%
(32.00) X %
%
Show Transcribed Text
Req A and B Req C and D
Current
Cost
Year 1
Year 2
Year 3
Year 4
ROI
Net Book
Value
%
%
%
%
Gross Book
Value
Complete this question by entering your answers in the tabs below.
ROI
6.12 X %
6.12 X %
%
%
Compute ROI using current cost, net book value and gross book value.
Note: Enter your answers as a percentage rounded to 2 decimal place (i.e., 32.10).
Show Transcribed Text
> Answer is not complete.
Gross Book
Value
Ć
<Req A and B
%
%
%
%
S
Req C and D >
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