When using the net book value to calculate return on investment (ROI),division managers controlling newer assets with little accumulated depreciation have an advantage over division managers controlling older assets with more accumulated depreciation.

Question

Quizplus · Accepted Answer

The net book value is lower for older assets due to more accumulated depreciation, which can actually lead to a higher ROI since ROI is calculated based on the net book value, making it easier for managers of older assets to show a higher return relative to the book value of their assets.

When Using the Net Book Value to Calculate Return on Investment