The St. Cloud division of Martinelli Company just purchased an asset for $150,000. The asset has a three-year life. Martinelli’s top management evaluates Freida Schmidt, manager of the St. Cloud division, based on her division’s ROI. She can choose to measure her assets 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 three years using the gross asset value? 

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

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