Question

A division is considering the acquisition of a new asset that will cost $2,520,000 and have...

A division is considering the acquisition of a new asset that will cost $2,520,000 and have a cash flow of $730,000 per year for each of the four years of its life. Depreciation is computed on a straight-line basis with no salvage value. Ignore taxes. Required: a. & b. What is the ROI for each year of the asset's life if the division uses beginning-of-year asset balances and net book value for the computation? What is the residual income each year if the cost of capital is 8 percent? (Enter "ROI" answers as a percentage rounded to 1 decimal place (i.e., 32.1). percentage rounded to 1 decimal place (i.e., 32.1). Negative amounts should be indicated by a minus sign.)

YEAR      INVESTMENT BASE        ROI       RESIDENTIAL INCOME

1                2520000                               %     $

2

3

4

0 0
Add a comment Improve this question Transcribed image text
Answer #1


Annual cash flow Less : Depreciation=2520000/4 Net income 730000 -630000 100000 Year Beg. Book value (Investment base) Deprec

Add a comment
Know the answer?
Add Answer to:
A division is considering the acquisition of a new asset that will cost $2,520,000 and have...
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
  • A division is considering the acquisition of a new asset that will cost $2,800,000 and have...

    A division is considering the acquisition of a new asset that will cost $2,800,000 and have a cash flow of $760,000 per year for each of the four years of its life. Depreciation is computed on a straight-line basis with no salvage value. Ignore taxes. YEAR INVESTMENT BASE ROI(%) RESIDUAL INCOME 1 $2,800,000 2 3 4 Required: a. & b. What is the ROI for each year of the asset's life if the division uses beginning-of-year asset balances and net...

  • A division is considering the acquisition of a new asset that will cost $2,780,000 and have...

    A division is considering the acquisition of a new asset that will cost $2,780,000 and have a cash flow of $740,000 per year for each of the four years of its life. Depreciation is computed on a straight-line basis with no salvage value. Ignore taxes. Required: a. & b. What is the ROI for each year of the asset's life if the division uses beginning-of-year asset balances and net book value for the computation? What is the residual income each...

  • A division is considering the acquisition of a new asset that will cost $2,640,000 and have...

    A division is considering the acquisition of a new asset that will cost $2,640,000 and have a cash flow of $770,000 per year for each of the four years of its life. Depreciation is computed on a straight-line basis with no salvage value. Ignore taxes. Required: a. & b. What is the ROI for each year of the asset's life if the division uses beginning-of-year asset balances and net book value for the computation? What is the residual income each...

  • A division is considering the acquisition of a new asset that will cost $2,820,000 and have a cash flow of $780,000 per...

    A division is considering the acquisition of a new asset that will cost $2,820,000 and have a cash flow of $780,000 per year for each of the four years of its life. Depreciation is computed on a straight-line basis with no salvage value. Ignore taxes. Required: a. & b. What is the ROI for each year of the asset's life if the division uses beginning-of-year asset balances and net book value for the computation? What is the residual income each...

  • The Singer Division of Patio Enterprises currently earns $3.92 million and has divisional assets of $24.5...

    The Singer Division of Patio Enterprises currently earns $3.92 million and has divisional assets of $24.5 million. The division manager is considering the acquisition of a new asset that will add to profit. The investment has a cost of $3,471,000 and will have a yearly cash flow of $864,000. The asset will be depreciated using the straight-line method over a six-year life and is expected to have no salvage value. Divisional performance is measured using ROI with beginning-of-year net book...

  • The Singer Division of Patio Enterprises currently earns $2.87 million and has divisional assets of $20.5...

    The Singer Division of Patio Enterprises currently earns $2.87 million and has divisional assets of $20.5 million. The division manager is considering the acquisition of a new asset that will add to profit. The investment has a cost of $3,447,000 and will have a yearly cash flow of $858,000. The asset will be depreciated using the straight-line method over a six-year life and is expected to have no salvage value. Divisional performance is measured using ROI with beginning-of-year net book...

  • The Singer Division of Patio Enterprises currently earns $2.64 million and has divisional assets ...

    The Singer Division of Patio Enterprises currently earns $2.64 million and has divisional assets of $22.0 million. The division manager is considering the acquisition of a new asset that will add to profit. The investment has a cost of $3,423,000 and will have a yearly cash flow of $852,000. The asset will be depreciated using the straight-line method over a six-year life and is expected to have no salvage value Divisional performance is measured using ROI with beginning-of-year net book...

  • Harbor Division has total assets (net of accumulated depreciation) of $690,000 at the beginning of year...

    Harbor Division has total assets (net of accumulated depreciation) of $690,000 at the beginning of year 1. One of the assets is a machine that has a net book value of $65,000. Expected divisional income in year 1 is $91,000 including $6,000 in income generated by the machine (after depreciation). Harbor's cost of capital is 10 percent. Harbor is considering disposing of the asset today (the beginning of year 1). Required: a. Harbor computes ROI using beginning-of-the-year net assets. What...

  • Check my work Harbor Division has total assets (net of accumulated depreciation) of $720,000 at the...

    Check my work Harbor Division has total assets (net of accumulated depreciation) of $720,000 at the beginning of year 1. One of the assets is a machine that has a net book value of $61,000. Expected divisional income in year 1 is $87,000 including $5,000 in income generated by the machine (after depreciation). Harbor's cost of capital is 11 percent. Harbor is considering disposing of the asset today (the beginning of year 1). points Skipped eBook Required: a. Harbor computes...

  • Check my work 9 The Singer Division of Patio Enterprises currently earns $2.34 million and has...

    Check my work 9 The Singer Division of Patio Enterprises currently earns $2.34 million and has divisional assets of $19.5 million. The division manager is considering the acquisition of a new asset that will add to profit. The investment has a cost of $3,375,000 and will have a yearly cash flow of $840,000. The asset will be depreciated using the straight-line method over a six-year life and is expected to have no salvage value. Divisional performance is measured using ROI...

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