The Street Division of Labrosse Logistics Just started operations. It purchased depreciable assets costing $41.5 million and having a four-year expected life, after which the assets can be salvaged for $8.3 million. In addition, the division has $41.5 million in assets that are not depreciable. After four years, the division will have $41.5 million avallable from these non depreciable assets. This means that the division has Invested $83 million in assets with a salvage value of $49.8 million. Annual operating cash flows are $13.1 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 (l.e., 32.10). ROI Net Book Value Year 1 15.66% Year 2 17.40% Year 3 19.58% Year 4 22.38% Gross Book Value 15.66 X% 15.66 x % 15.66% 15.66%
The Street Division of Labrosse Logistics Just started operations. It purchased depreciable assets costing $41.5 million and having a four-year expected life, after which the assets can be salvaged for $8.3 million. In addition, the division has $41.5 million in assets that are not depreciable. After four years, the division will have $41.5 million avallable from these non depreciable assets. This means that the division has Invested $83 million in assets with a salvage value of $49.8 million. Annual operating cash flows are $13.1 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 (l.e., 32.10). ROI Net Book Value Year 1 15.66% Year 2 17.40% Year 3 19.58% Year 4 22.38% Gross Book Value 15.66 X% 15.66 x % 15.66% 15.66%
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 $41.5 million and having a
four-year expected life, after which the assets can be salvaged for $8.3 million. In addition, the division has $41.5 million in assets that
are not depreciable. After four years, the division will have $41.5 million avallable from these non depreciable assets. This means that
the division has Invested $83 million in assets with a salvage value of $49.8 million. Annual operating cash flows are $13.1 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 (l.e., 32.10).
ROI
Net Book Value
Year 1
15.66%
Year 2
17.40%
Year 3
19.58%
Year 4
22.38%
Gross Book Value
15.66 X%
15.66 x %
15.66%
15.66%
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