Assume that a machine shop acquires $680,000 of fixed assets with a useful life of 4 years and no residual value. The shop uses straight-line depreciation. The company judges the shop manager based on income in relation to these fixed assets. Annual net income, after deducting depreciation, is $25,000. Assume that sales, and all expenses except depreciation, are on a cash basis. Dividends equal net income. Thus, cash in the amount of the depreciation charge will accumulate each year. The plant manager's performance is judged in relation to fixed assets because all current assets, including cash, are considered under central-company control. Assume (unrealistically) that any cash accumulated remains idle. Ignore taxes. Read the requirements. Begin by selecting the formula you will need to calculate return on assets. Income / Average assets Return on assets Requirement 1. Prepare a comparative tabulation of the plant's rate of return and the company's overall rate of return based on (a) gross assets, and (b) net book value of assets. Begin to complete the comparative tabulation by showing the plant's performance. (Complete all answer boxes. Enter the rate of returns as percentages rounded to the nearest tenth of a percent, X.X%.) Plant Performance Fixed assets Rate of return on Requirements Book value Average (a) (b) Gross Accumulated end of net book Gross Average net Year cost depreciation year value cost book value 1 % % 1. Prepare a comparative tabulation of the plant's rate of return and the company's overall rate of return based on a. gross i.e., original cost) assets. b. net book value of assets. 2. Evaluate the relative merits of gross assets and net book value of assets as investment bases. 2 % % 3 % % 4 % %