H1. The Street Division of Labrosse Logistics just started operations. It purchased depreciable assets costing $36.5 million and having afour-year expected life, after which the assets can be salvaged for $7.30 million. In addition, the division has $36.5 million in assets thatare not depreciable. After four years, the division will have $36.5 million available from these nondepreciable assets. This means thatthe division has invested $73.0 million in assets with a salvage value of $43.80 million. Annual operating cash flows are $12.5 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.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 ofYear1234Depreciation is as follows.Year1234Replacement Cost$73,000,000 × 1.1 = $80,300,000$80,300,000 × 1.1 = $88,330,000Etc.For the Year$ 8,030,0008,833,0009,716,30010,687,930Required:11Check my workAnnual Cash Flow$12,500,000 × 1.1 = $13,750,000$13,750,000 × 1.1 = $15, 125,000Etc.'Accumulated"$8,030,000 (= 10% × $80,300,000)17,666,000 (= 20% × 88,330,000)29,148,90042,751,720Note that "accumulated" depreciation is 10 percent of the gross book value of depreciable assets after one year, 20 percent after twoyears, and so forth. Req A and B Req C and DComplete this question by entering your answers in the tabs below.HistoricalCostCompute 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).Year 1Year 2Year 3Year 4Net BookValue6.88 X %(7.09) X%(32.00) X %%Show Transcribed TextReq A and B Req C and DCurrentCostYear 1Year 2Year 3Year 4ROINet BookValue%%%%Gross BookValueComplete this question by entering your answers in the tabs below.ROI6.12 X %6.12 X %%%Compute ROI using current cost, net book value and gross book value.Note: Enter your answers as a percentage rounded to 2 decimal place (i.e., 32.10).Show Transcribed Text> Answer is not complete.Gross BookValueĆ

The return on investment explains the relationship between the return in terms of benefit and the…

The Street Division of Labrosse Logistics just started operations. It purchased depreciable assets costing $36.5 million and having a four-year expected life, after which the assets can be salvaged for $7.30 million. In addition, the division has $36.5 million in assets that are not depreciable. After four years, the division will have $36.5 million available from these nondepreciable assets. This means that the division has invested $73.0 million in assets with a salvage value of $43.80 million. Annual operating cash flows are $12.5 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 $36.5 million and having a four-year expected life, after which the assets can be salvaged for $7.30 million. In addition, the division has $36.5 million in assets that are not depreciable. After four years, the division will have $36.5 million available from these nondepreciable assets. This means that the division has invested $73.0 million in assets with a salvage value of $43.80 million. Annual operating cash flows are $12.5 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.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 18P

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