Question

Avion condition that will and
0 0
Add a comment Improve this question Transcribed image text
Answer #1

Solution:

Annual depreciation = $2,700,000/ 4 = $675,000

Annual net income = Annual cash inflows - Depreciation = $710,000 - $675,000 = $35,000

Computation of ROI and residual Income
Particulars Year 1 Year 2 Year 3 Year 4
Investment base $2,700,000.00 $2,025,000.00 $1,350,000.00 $675,000.00
Annual income $35,000.00 $35,000.00 $35,000.00 $35,000.00
Minimum required income (8% of investment base) $216,000.00 $162,000.00 $108,000.00 $54,000.00
ROI (Annual income / Investment base) 1.3% 1.7% 2.6% 5.2%
Residual income (Net income - Minimum required income) -$181,000.00 -$127,000.00 -$73,000.00 -$19,000.00
Add a comment
Know the answer?
Add Answer to:
Avion condition that will and
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT