The Sto. Marie Division of Pacific Media Corporation just started operations. It purchased depredable assets costing $55 million and having a four-year expected life, after which the assets can be salvaged for $11 million. In addition, the division has $55 million in assets that are not depreciable. After four years, the division will have $55 million available from these Dondenceciable assets. This means that the division has invested $110 million in assets with a salvage value of $66 million. Annual depreciation is $11 million. Annual operating cash flows are $25 million. In computing ROI, this division uses end-of-year asset values in the denominator. Depreciation is computed on a straight- line basis, recognizing the salvage values noted. Ignore taxes. Assume that all cash flows increase 10 percent at the end of each year. This has the following effect on the assets' replacement cost and annual cash flows. End of Year Replacement Cost Annual Cash Flow $ 110,000,000 1.1 - $ 121,000,000 $ 25,000,000 ~ 1.1 - $ 27,500,000 $ 121,000,000 1.1 - $ 133,100,000 $ 27,500,000 1.1 - $ 30,250,000 Etc. Etc. Depre ation is as follows. Year For the Year 1 $12,100,000 2 13,310,000 14,641,000 16,105,100 "Accumulated" $12,100,000 (-10% * $121,000,000) 26,620,000 (- 200 x 133,100,000) 43,923,000 6 4, 420,400 Note that "accumulated" depreciation is 10 percent of the gross book value of depreciable assets after one year, 20 percent after two years, and so forth. Required: a. & b. Compute ROI using historical cost, net book value and gross book value. G. & d. Compute ROI using current cost, net book value and gross book value. Reg C and D Compute ROI using historical cost, net book value and gross book value. (Enter your answers as a percentage rounded to 1 decimal place (I.e., 32.1).) ROI Historical Cost Net Book Gross Book Value Value Year 1 Year 2 Year 3 Year 4 Compute ROI using current cost, net book value and gross book value. (Enter your answers as a percentage rounded to I decimal place (i.e., 32.1).) ROI Current Cost Net Book Gross Book Value Value Year 1 Year 2 % Year 3 year The Sto. Marie Division of Pacific Media Corporation just started operations. It purchased depredable assets costing $55 million and having a four-year expected life, after which the assets can be salvaged for $11 million. In addition, the division has $55 million in assets that are not depreciable. After four years, the division will have $55 million available from these Dondenceciable assets. This means that the division has invested $110 million in assets with a salvage value of $66 million. Annual depreciation is $11 million. Annual operating cash flows are $25 million. In computing ROI, this division uses end-of-year asset values in the denominator. Depreciation is computed on a straight- line basis, recognizing the salvage values noted. Ignore taxes. Assume that all cash flows increase 10 percent at the end of each year. This has the following effect on the assets' replacement cost and annual cash flows. End of Year Replacement Cost Annual Cash Flow $ 110,000,000 1.1 - $ 121,000,000 $ 25,000,000 ~ 1.1 - $ 27,500,000 $ 121,000,000 1.1 - $ 133,100,000 $ 27,500,000 1.1 - $ 30,250,000 Etc. Etc. Depre ation is as follows. Year For the Year 1 $12,100,000 2 13,310,000 14,641,000 16,105,100 "Accumulated" $12,100,000 (-10% * $121,000,000) 26,620,000 (- 200 x 133,100,000) 43,923,000 6 4, 420,400 Note that "accumulated" depreciation is 10 percent of the gross book value of depreciable assets after one year, 20 percent after two years, and so forth. Required: a. & b. Compute ROI using historical cost, net book value and gross book value. G. & d. Compute ROI using current cost, net book value and gross book value. Reg C and D Compute ROI using historical cost, net book value and gross book value. (Enter your answers as a percentage rounded to 1 decimal place (I.e., 32.1).) ROI Historical Cost Net Book Gross Book Value Value Year 1 Year 2 Year 3 Year 4 Compute ROI using current cost, net book value and gross book value. (Enter your answers as a percentage rounded to I decimal place (i.e., 32.1).) ROI Current Cost Net Book Gross Book Value Value Year 1 Year 2 % Year 3 year
