The St Cloud division of Upcraft Company just purchased an asset for €180,000. The asset has a 3-year life. Upcraft’s top management evaluates Freida Ramirez, manager of the St Cloud division, based on ROI for this asset. She can choose to measure the asset using either gross asset value or net asset value. Her operating income before depreciation each year is €80,000.

1. What is the St Cloud division’s ROI for each of the 3 years using the gross asset value?

2. What is the St Cloud division’s ROI for each of the 3 years using the net asset value?

3. If Ramirez expects Upcraft to transfer her to a different division in about a year, which asset valuation policy would she prefer?