The Street Division of Labrosse Logistics just started operations. It purchased depreciable assets costing $37.7 million and having afour-year expected life, after which the assets can be salvaged for $7.54 million. In addition, the division has $37.7 million in assets thatare not depreciable. After four years, the division will have $37.7 million available from these nondepreciable assets. This means thatthe division has invested $75.4 million in assets with a salvage value of $45.24 million. Annual operating cash flows are $13.7 million. Incomputing 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 ofYear1234Replacement Cost$75,400,000 x 1.1 = $82,940,000$82,940,000 x 1.1 = $91, 234,000Etc.Depreciation is as follows.Year123For the Year$ 8,294,0009,123,40010,035,74011,039,314Annual Cash Flow$13,700,000 x 1.1 = $15,070,000$15,070,000 × 1.1 = $16,577,000Etc."Accumulated"$8,294,000 (= 10 % x $82,940,000)18,246,800 (= 20% x 91,234,000)30,107,22044,157,256Note that "accumulated" depreciation is 10 percent of the gross book value of depreciable assets after one year, 20 percent after twoyears, and so forth.Required:a. & b. Compute ROI using historical cost, net book value and gross book value.c. & d. Compute ROI using current cost, net book value and gross book value. Required:a. & b. Compute ROI using historical cost, net book value and gross book value.c. & d. Compute ROI using current cost, net book value and gross book value.Complete this question by entering your answers in the tabs below.Req A and B Req C and DCompute 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).HistoricalCostYear 1Year 2Year 3Year 4Net BookValue%%%%ROIGross BookValue%%%%< Req A and BReq C and D >

The return on investment is the ratio which tells the profit earned from the cost of investment that…

The Street Division of Labrosse Logistics just started operations. It purchased depreciable assets costing $37.7 million and having a four-year expected life, after which the assets can be salvaged for $7.54 million. In addition, the division has $37.7 million in assets that are not depreciable. After four years, the division will have $37.7 million available from these nondepreciable assets. This means that the division has invested $75.4 million in assets with a salvage value of $45.24 million. Annual operating cash flows are $13.7 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 $37.7 million and having a four-year expected life, after which the assets can be salvaged for $7.54 million. In addition, the division has $37.7 million in assets that are not depreciable. After four years, the division will have $37.7 million available from these nondepreciable assets. This means that the division has invested $75.4 million in assets with a salvage value of $45.24 million. Annual operating cash flows are $13.7 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

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The Street Division of Labrosse Logistics Just started operations. It purchased depreciable assets costing $39.5 million and having a four-year expected life, after which the assets can be salvaged for $7.9 million. In addition, the division has $39.5 million in assets that are not depreciable. After four years, the division will have $39.5 million available from these non depreciable assets. This means that the division has invested $79 million in assets with a salvage value of $47.4 million. Annual operating cash flows are $12.7 million. In computing ROI, this division uses beginning-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. Note: Enter your answers as a percentage rounded to 2 decimal place (Le., 32.10). Year 1 Year 2 Year 3 Year 4 Net Book Value % % ROI Gross Book Value %
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