1, The Complete Office Company has three divisions: Layout and Marketing, Office Furniture, and Office Supplies. Layout and Marketing is primarily a consulting and sales group with no fixed assets and minimal current assets Office Furniture is a manufacturing division with machinery for the pro- duction and assembly of desks, chairs, and modular dividers, The Office Supplies Division has light machinery for the packaging and distribution of paper and other office supplies. It bea current assets in the form of inventory and receivables, and it has some fixed assets in the form of machinery. The Complete Office Company depreciates all of its fixed assets over 10 years on a straight-line basis, and it calculates FDA on beginning of your gross book value of aseats. The operating expenses for each division (besides depreciation en fixed assets) are $200,040 for Layout and Marketing, $100,000 for Office Furniture, and $160,000 for Office Supplies. The company's assets and gross profile for 1997 are as follows: Layout and Office Office Marketing Furniture Supplies Current assets . . $200, 000 200,000 $200,000 Fixed assets. . . 1,000,000 500,DOD Total assets . . 200,000 1,200,000 700,000 Gross profit trom sales. 401,000 400.000 100,000 Question Please compute an ROA figure for each division for 1997. 2. The manager of the Big Spender Division of Growing Industries has ro- ceived formal approval to buy a specific new machine for his division. Given the following assumed data excerpted from his capital expenditure request, what ROAR (hased on gross book value) will his division earn for 1896 and 1987? Date Excerpted from Capital Expenditure Request: (1) Budgeted aftertax profits of $1,000,000 per year. (2) January 1, 1986, budgeted assets of $50,000,000, consisting of $12,000,090 in current assets and $18,000,000 in fixed assets, at gross book value. (8) Net book value of the existing fixed assets was $9,000,000, (4) All fixed assets are depreciated over 10 years on a straight-lire depre- ciation method. There are no noncash expenses or revenues other than depreciation, and the same depreciation method is used for tax and books. This case was prepared by Profebor Ed Barrett, Thunderbird Graduate School of Management, Phoenix, AZ. Copyright by Ed Barrett