$3,5)$

The Street Division of Labrosse Logistics Just started operations. It purchased depreclable assets costing $$55$ million and having a

four$-$year expected life, after which the assets can be salvaged for $$11\mathrm{.}0$ million. In addition, the division has $$55$ million in assets that

are not depreclable. After four years, the division will have $$55$ million avallable from these nondepreclable assets. This means that the

division has invested $$110$ million In assets with a salvage value of $$66\mathrm{.}0$ million. Annual operating cash flows are $$21$ million. In

computing ROI, this division uses end$-$of$-$year asset values in the denominator. Depreciation is computed on a straight$-$IIne basis,

recognizing the salvage values noted. Ignore taxes.

Assume that the company uses an $11$ percent cost of capltal.

Required:

a$.$ Compute residual Income, using net book value for each year.

b$.$ Compute residual Income, using gross book value for each year.

Note: For all the requirements, enter your answers In thousands of dollars. Negatlve amounts should be Indlcated by a minus

sign.