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year 2 3 and 4 I can't figure out for netbook value Problem 14-57 (Algo) Compare Historical, Net Book Value to Gross Book Value, Residual
year 2 3 and 4 I can't figure out for netbook value
Problem 14-57 (Algo) Compare Historical, Net Book Value to Gross Book Value, Residual Income (LO 14. 3,5) The Ste. Marie Division of Pacific Media Corporation just started operations. It purchased depreciable assets costing $90 million and having a four-year expected life, after which the assets can be salvaged for $18 million. In addition, the division has $90million in assets that are not depreciable. After four years, the division will have $90 million available from these nondepreciable assets. This means that the division has invested $180 million in assets with a salvage value of $108 million. Annual depreciation is $18 million. Annual operating cash flows are $47 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 the company uses a 12 percent cost of capital. Required: a. Compute residual income, using net book value for each year. b. Compute residual income, using gross book value for each year. Enter your answers in thousands of dollars.)Step by Step Solution
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