What is the return on investment (ROI) assuming User-Friendly uses (a) the straight-line method for depreciation and (b) beginning-of-year net book values to compute ROI?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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The following information was presented by User-Friendly Industries Company for an asset purchased at the beginning of the previous year.
 

         
Original cost of the asset $ 20,000    
Useful life of the asset   10 years  
Annual operating profit, including depreciation $ 4,000    
Salvage value $ -0-    
 


What is the return on investment (ROI) assuming User-Friendly uses (a) the straight-line method for depreciation and (b) beginning-of-year net book values to compute ROI?  

 

 

Multiple Choice
  •  

    20.0%.

  •  

    11.1%.

  •  

    25.0%.

  •  

    22.2%.

 
 
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