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A division is considering the acquisition of a new asset that will cost $2,520,000 and have a cash flow of $700,000 per year for each
A division is considering the acquisition of a new asset that will cost $2,520,000 and have a cash flow of $700,000 per year for each of the 4 years of its life. Depreciation is computed on a straight-line basis with no salvage value. Ignore taxes.
a. What is the ROI for each year of the assets life if the division uses beginning-of-year asset balances and net book value for the computation. b. What is the residual income each year if the cost of capital is 8%.
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