Please answer the first question (38) ONLY!!
Disposal on Performance Measures Refer to the facts in Exercise 14-37, but assume that Harbor has been leasing the machine for $12,000 annually. Assume also that the machine generates income of $5,400 annually after the lease payment. Harbor can cancel the lease on the machine without penalty at any time. Required a. Harbor computes ROI using beginning- of-the-year net assets. What will the divisional ROI be for year 1 assuming Harbor retains the asset? b. What would divisional ROI be for year 1 assuming Harbor disposes of the asset? c. Harbor computes residual income using beginning-of-the-year net assets. What will the divisional residual income be for year 1 assuming Harbor retains the asset? d. What would divisional residual income be for year 1 assuming Harbor disposes of the asset for its book value (there is no gain or loss on the sale)? (LO 14-2,3) 14-37. Impact of an Asset Disposal on Performance Measures Harbor Division has total assets (net of accumulated depreciation) of $660,000 at the beginning of year 1. One of the assets is a machine that has a net book value of $60,000. Expected divisional income in year 1 is Page 604 $92,400 including $5,400 in income generated by the machine (after depreciation). Harbor's cost of capital is 12 percent. Harbor is considering disposing of the asset today (the beginning of year 1). of-the-year net assets. What will the divisional ROI be for year 1 assuming Harbor retains the asset? b. What would divisional ROI be for year 1 assuming Harbor disposes of the asset for its book value (there is no gain or loss on the sale)? c. Harbor computes residual income using beginning-of-the-year net assets. What will the divisional residual income be for year 1 assuming Harbor retains the asset? d. What would divisional residual income be for year 1 assuming Harbor disposes of the asset for its book value (there is no gain or loss on the sale)? Disposal on Performance Measures Refer to the facts in Exercise 14-37, but assume that Harbor has been leasing the machine for $12,000 annually. Assume also that the machine generates income of $5,400 annually after the lease payment. Harbor can cancel the lease on the machine without penalty at any time. Required a. Harbor computes ROI using beginning- of-the-year net assets. What will the divisional ROI be for year 1 assuming Harbor retains the asset? b. What would divisional ROI be for year 1 assuming Harbor disposes of the asset? c. Harbor computes residual income using beginning-of-the-year net assets. What will the divisional residual income be for year 1 assuming Harbor retains the asset? d. What would divisional residual income be for year 1 assuming Harbor disposes of the asset for its book value (there is no gain or loss on the sale)? (LO 14-2,3) 14-37. Impact of an Asset Disposal on Performance Measures Harbor Division has total assets (net of accumulated depreciation) of $660,000 at the beginning of year 1. One of the assets is a machine that has a net book value of $60,000. Expected divisional income in year 1 is Page 604 $92,400 including $5,400 in income generated by the machine (after depreciation). Harbor's cost of capital is 12 percent. Harbor is considering disposing of the asset today (the beginning of year 1). of-the-year net assets. What will the divisional ROI be for year 1 assuming Harbor retains the asset? b. What would divisional ROI be for year 1 assuming Harbor disposes of the asset for its book value (there is no gain or loss on the sale)? c. Harbor computes residual income using beginning-of-the-year net assets. What will the divisional residual income be for year 1 assuming Harbor retains the asset? d. What would divisional residual income be for year 1 assuming Harbor disposes of the asset for its book value (there is no gain or loss on the sale)
