Return on Investment and Incentive/Goal-Congruence Issues; Residual Income; Spreadsheet Application. Assume the purchase of new delivery trucks used in a product-delivery service. This equipment is needed to improve delivery service and respond to recent environmental goals embraced by the company. The cost of the new equipment is $1,200,000; the expected useful life of these assets is 5 years. Estimated salvage value at the end of the 5 years is $0. The company will depreciate these assets over a 5-year period using straight line depreciation. The anticipated increase in operating income (before depreciation deductions) attributable to the use of the new equipment is $360,000. Ignore taxes. Assume in all cases below that the proposed investment, on the discounted cash flow basis, is desirable (i.e., that its estimated net present value is positive).

Generate, using an Excel spreadsheet, a schedule of the year-by-year ROIs associated with this investment opportunity. For purposes of these calculations, define the investment base (denominator of the ROI ratio) as average net book value of the assets during the year. What is the ROI in year 3 using net book value?