The Street Division of Labrosse Logistics just started operations. It purchased depreciable assets costing $38.5 million and having a four-year expected life, after which the assets can be salvaged for $7.7 million. In addition, the division has $38.5 million in assets that are not depreciable. After four years, the division will have $38.5 million available from these non depreciable assets. This means that the division has invested $77 million in assets with a salvage value of $46.2 million. Annual operating cash flows are $12.5 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). ROI Net Book Value Gross Book Value Year 1 % % Year 2 % % Year 3 % % Year 4 % %

Crane Corp. management is considering purchasing a machine that will cost $117,250 and will be depreciated on a straight-line basis over a five-year period. The sales and expenses (excluding depreciation) for the next five years are shown in the following table. The company’s tax rate is 34 percent.     Year 1   Year 2   Year 3   Year 4   Year 5 Sales   $127,450   $176,875   $247,455   $254,440   $271,125 Expenses   $141,410   $128,488   $137,289   $145,112   $139,556 Crane will accept all projects that provide an accounting rate of return (ARR) of at least 45 percent. (a1)     Calculate accounting rate of return. (Round answer to 1 decimal place, e.g. 15.2%.) Accounting rate of return   enter the Accounting rate of return in percentages rounded to 1 decimal place %

A division is considering the acquisition of a new asset that will cost $2,960,000 and have a cash flow of $790,000 per year for each of the four years of its life. Depreciation is computed on a straight-line basis with no salvage value. Ignore taxes.   Required: a. & b. What is the ROI for each year of the asset's life if the division uses beginning-of-year asset balances and net book value for the computation? What is the residual income each year if the cost of capital is 8 percent? (Enter "ROI" answers as a percentage rounded to 1 decimal place (i.e., 32.1). Negative amounts should be indicated by a minus sign.)     Year Investment Base ROI Residual Income 1 $2,960,000   %   2     %   3     %   4     %

Harbor Division has total assets (net of accumulated depreciation) of $542,000 at the beginning of year 1. Harbor also leases a machine for $23,000 annually. Expected divisional income in year 1 is $81,000 including $5,500 in income generated by the leased machine (after the lease payment). Harbor’s cost of capital is 10 percent. Harbor can cancel the lease on the machine without penalty at any time and is considering disposing of it today (the beginning of year 1).   Required: a. Harbor computes ROI using beginning-of-the-year net assets. What will the divisional ROI be for year 1 assuming Harbor retains the leased machine? (Enter your answer as a percentage rounded to 1 decimal place (i.e., 32.1).) b. What would divisional ROI be for year 1 assuming Harbor disposes of the leased machine? (Enter your answer as a percentage rounded to 1 decimal place (i.e., 32.1).) c. Harbor computes residual income using beginning-of-the-year net assets. What will the divisional residual income be for…