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 % %

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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
%
%
Transcribed Image Text: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 % %
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