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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.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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.
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 >
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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