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Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher
Edition 3ISBN: 0073527114Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher
Edition 3ISBN: 0073527114Compare ROI Using Net Book and Gross Book Values
Refer to the data in Exercise 14-29. Assume that the division uses beginning-of-year asset values in the denominator for computing ROI.
Required
a. Compute ROI, using net book value.
b. Compute ROI, using gross book value.
c. If you worked Exercise 14-29, compare those results with those in this exercise. How different is the ROI computed using end-of-year asset values, as in Exercise 14-29, from the ROI using beginning-of-year values in this exercise?
Verified
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Given,
Total assets invested (Gross Book value) are $60 million
Salvage value of assets at the end of the 4th year are $36 million
Annual operating cash flows are $15 million
Annual depreciation is $6 million
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