Three years ago, one division of the Calsone Enterprise Company purchased depreciable assets costing $2,000,000. The cash flows from these assets for the past three years have been:
$$\begin{array} { c c c }
\text { Year } & { \text { Cash flows } } \
1 & \$ 600,000 \
2 & 700,000 \
3 & 810,000
\end{array}$$
Calsone uses the straight-line depreciation method and the assets had an estimated useful life of 10 years with no salvage value. For return on investment (ROI) calculations, Calsone uses end-of-year balances.
Required:
a. What was the ROI for each year using historical cost and gross book value?
b. What was the ROI for each year using historical cost and net book value?

Question

Three years ago, one division of the Calsone Enterprise Company purchased depreciable assets costing $2,000,000. The cash flows from these assets for the past three years have been:
 $$\begin{array} { c c c } 
\text { Year } & { \text { Cash flows } } \
1 & \$  600,000 \
2 &  700,000 \
3 & 810,000
\end{array}$$ 
Calsone uses the straight-line depreciation method and the assets had an estimated useful life of 10 years with no salvage value. For return on investment (ROI) calculations, Calsone uses end-of-year balances.
Required:
a. What was the ROI for each year using historical cost and gross book value?
b. What was the ROI for each year using historical cost and net book value?

Quizplus · Accepted Answer

The Answer of Three years ago, one division of the Calsone Enterprise Company purchased depreciable assets costing $2,000,000. The cash flows from these assets for the past three years have been:
 $$\begin{array} { c c c } 
\text { Year } & { \text { Cash flows } } \
1 & \$  600,000 \
2 &  700,000 \
3 & 810,000
\end{array}$$ 
Calsone uses the straight-line depreciation method and the assets had an estimated useful life of 10 years with no salvage value. For return on investment (ROI) calculations, Calsone uses end-of-year balances.
Required:
a. What was the ROI for each year using historical cost and gross book value?
b. What was the ROI for each year using historical cost and net book value?

Three Years Ago, One Division of the Calsone Enterprise Company Year Cash flows 1$600,0002700,0003810,000\begin{array} { c c c } \text { Year } & { \text { Cash flows } } \\1 & \$ 600,000 \\2 & 700,000 \\3 & 810,000\end{array} Year 123​ Cash flows $600,000700,000810,000​

Three Years Ago, One Division of the Calsone Enterprise Company $\begin{array} { c c c } \text { Year } & { \text { Cash flows } } \\1 & \$ 600,000 \\2 & 700,000 \\3 & 810,000\end{array}$