The following information was presented by Delta Manufacturing Company for an asset purchased at the end of the previous year. What is the return on investment (ROI)assuming Delta (a)uses the straight-line method for depreciation and (b)beginning-of-year net book values to compute ROI?
A)11.1%
B)20.0%
C)22.2%
D)25.0%

Question

Quizplus · Accepted Answer

To calculate ROI using the straight-line method for depreciation, we need to divide net income by the beginning-of-year net book value of the asset.

Net income = $40,000
Beginning-of-year net book value = $180,000

ROI = Net Income / Beginning-of-year net book value = $40,000 / $180,000 = 0.2222 = 22.2%

Therefore, the best choice is C.

The Following Information Was Presented by Delta Manufacturing Company for an Asset