You have been hired on the controller’s staff of a large motel chain that owns many motels. Your first assignment is to help the controller and executive vice-president decide whether to continue to use some of its old motels. In addition, these executives are pondering how to evaluate the performance of these motels in terms of return on investment. Prior to your employment, the executives had explored various ways of establishing a value for such motels. Net book value (based on historical costs), disposal value, and replacement value are the three alternatives now being considered.

Which of the three bases is relevant to deciding whether to dispose of an old motel? Why?
Which of the three bases is applicable for judging the performance of the motel and its manager? Why? Why is your answer the same as or different from your answer in requirement 1?