ROI computations comparing net and gross book value. The following information relates to the operating performance of two divisions of Timely Transportation.

Inc. for last year.

a. Compute the return on investment (ROI) of each division, using total assets at gross book value as the investment base.

b. Compute the ROI of each division, using total assets net of accumulated depreciation (net book value) as the investment base.

c. Which of the two measures do you think gives the better indication of operating performance? Explain your reasoning.

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Operating Profit Total Assets (at gross acquisition cost). Total Assets (net of accumulated depreciation). Eastern Division Western Division $ 2,000,000 20,000,000 15,000,000 $ 2,500,000 50,000,000 15,000,000