The Street Division of Labrosse Logistics just started operations. It purchased depreciable assets costing $40.5 million and having a four-year expected life, after which the assets can be salvaged for $8.1 million. In addition, the division has $40.5 million in assets that are not depreciable. After four years, the division will have $40.5 million available from these non depreciable assets. This means that the division has invested $81 million in assets with a salvage value of $48.6 million. Annual operating cash flows are $12.9 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). Year 1 Net Book Value 39.81 % ROI Gross Book Value 15.02
The Street Division of Labrosse Logistics just started operations. It purchased depreciable assets costing $40.5 million and having a four-year expected life, after which the assets can be salvaged for $8.1 million. In addition, the division has $40.5 million in assets that are not depreciable. After four years, the division will have $40.5 million available from these non depreciable assets. This means that the division has invested $81 million in assets with a salvage value of $48.6 million. Annual operating cash flows are $12.9 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). Year 1 Net Book Value 39.81 % ROI Gross Book Value 15.02
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 $40.5 million and having a
four-year expected life, after which the assets can be salvaged for $8.1 million. In addition, the division has $40.5 million in assets that
are not depreciable. After four years, the division will have $40.5 million available from these non depreciable assets. This means that
the division has invested $81 million in assets with a salvage value of $48.6 million. Annual operating cash flows are $12.9 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).
Year 1
Year 2
Year 3
Year 4
Net Book Value
39.81
53.09
79.63
159.26
XXXX
%
%
%
%
ROI
Gross Book Value
15.93 %
15.93 %
15.93 %
15.93 X %
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