Which of the following would be an argument for using the gross cost of plant and equipment as part of operating assets in return on investment computations?
A) It is consistent with the computation of net operating income, which includes depreciation as an operating expense.
B) It is consistent with the balance sheet presentation of plant and equipment.
C) It eliminates the age of equipment as a factor in ROI computations.
D) It discourages the replacement of old, worn-out equipment because of the dramatic, adverse effect on ROI.

Question

Quizplus · Accepted Answer

Using the gross cost of plant and equipment eliminates the impact of depreciation and, therefore, the age of the equipment on ROI computations, making comparisons more consistent regardless of the age of the assets.

Which of the Following Would Be an Argument for Using