The chief operating officer of the Wisconsin Corporation is considering the effect of depreciation on company ROI. In the most recent year, net operating profit after taxes was $30,000,000 and investment (total assets of $360,000,000 less noninterest-bearing current liabilities of $20,000,000) was $340,000,000.

Required
a. Assuming that total assets will decline each year by 5 percent due to depreciation of plant and equipment but NOPAT will remain constant calculate ROI for each of the next five years.
b. Explain why evaluation in terms of ROI may lead managers to delay purchases of equipment that, in the long run, will be needed to remaincompetitive.

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2011 2012 $45,000,000 $1,300,000 Total assets Noninterest-bearing current liabilities Net income Interest expense Sales Tax rate 4,000,000 3,500,000 2,200,000 4,500,000 4,500,000 2,700,000 87,500,000 40% 60,00,000 87,5 40%