One division of the Marvin Educational Enterprises has depreciable assets costing $4,700,000. The

cash ows from these assets for the past three years have been:

YearCash ows

1$ 1,739,000

2$ 1,974,000

3$2,068,000

The current (i.e., replacement) costs of these assets were expected to increase 20% each year.

Marvin used the straight-line depreciation method; the estimated useful life is 10-years with no

salvage value. For return on investment (ROI) calculations, Marvin uses end-of-year balances.

What is the ROI using historical cost and gross book value?

Year 1Year 2Year 3

A. 27.0 %32.0 %34.0 %

B. 32.0 %35.0 %35.5 %

C. 25.0 %33.5 %31.5 %

D. 37.0 %42.0 %44.0 %