When measuring invested capital for purposes of calculating return on investment,managers in practice predominantly use ________.
A) net book value at current cost
B) net book value at historical cost
C) gross book value at historical cost
D) gross book value at replacement cost

Question

Quizplus · Accepted Answer

Managers in practice predominantly use net book value at historical cost to measure invested capital for the purpose of calculating return on investment. Historical cost reflects the actual cost of the assets at the time of purchase and is adjusted for depreciation, making it a simple and straightforward method of calculating invested capital. Gross book value at replacement cost can be a useful measure for certain industries, such as those with significant fluctuations in asset values, but it is less commonly used. Net book value at current cost may be more accurate in reflecting the current value of the assets but may require more complex adjustments and is not widely used in practice.

When Measuring Invested Capital for Purposes of Calculating Return on Investment,managers