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 (i.e., 32.10). Year 1 Year 2 Year 3 Year 4 ROI Net Book Value Gross Book Value % % % % % % % %
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 (i.e., 32.10). Year 1 Year 2 Year 3 Year 4 ROI Net Book Value Gross Book Value % % % % % % % %
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 18P
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Question
![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 (i.e., 32.10).
Year 1
Year 2
Year 3
Year 4
Net Book Value
%
%
%
%
ROI
Gross Book Value
%
%
%
%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fff7c3c5b-aab0-47cd-a8ff-abb1d24ac657%2Fbdb831a6-54d8-49c1-a92a-a62cabfeeb48%2Fy44tpvq_processed.png&w=3840&q=75)
Transcribed Image Text: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 (i.e., 32.10).
Year 1
Year 2
Year 3
Year 4
Net Book Value
%
%
%
%
ROI
Gross Book Value
%
%
%
%
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