ROl computations with replacement costs. The following information relates to the operating performance of two divisions of Hurtz Corporation, a newspaper publisher, for l ast year.

a. Compute the return on investment (ROD of each division, using total assets stated at acquisition cost as the investment base.

b. Compute the ROl of each division, using total assets based on current replacement cost 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 (based on acquisition cost).. Total Assets (based on current replacement costs).. Toronto Division Phoenix Division $1,200,000 $ 800,000 4,000,000 7.500,000 6,000,000 8,000,000