The Ste. Marie Division of Pacific Media Corporation just started operations. It purchased depreciable assets costing $52 million and having a four-year expected life, after which the assets can be salvaged for $10.4 million. In addition, the division has $52 million in assets that are not depreciable. After four years, the division will have $52 million available from these nondepreciable assets. This means that the division has invested $104 million in assets with a salvage value of $62.4 million. Annual depreciation is $10.4 million. Annual operating cash flows are $25 million. Depreciation is computed on a straight-line basis, recognizing the salvage values noted. Ignore taxes. Assume that the division uses beginning-of-year asset values in the denominator for computing ROI. Required: a. & b. Compute ROI, using net book value and gross book value. (Enter your answers as a percentage rounded to 1 decimal place (i.e., 32.1).)
The Ste. Marie Division of Pacific Media Corporation just started operations. It purchased depreciable assets costing $52 million and having a four-year expected life, after which the assets can be salvaged for $10.4 million. In addition, the division has $52 million in assets that are not depreciable. After four years, the division will have $52 million available from these nondepreciable assets. This means that the division has invested $104 million in assets with a salvage value of $62.4 million. Annual depreciation is $10.4 million. Annual operating
Required:
a. & b. Compute ROI, using net book value and gross book value. (Enter your answers as a percentage rounded to 1 decimal place (i.e., 32.1).)
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