If ROI is used to evaluate a manager’s performance for a relatively new division, which of...
If ROI is used to evaluate a manager’s performance for a relatively new division, which of the following measures for assets (or investment) will increase ROI? a. Gross book value used instead of net book value. b. Net book value using accelerated rather than straight-line depreciation. c. Gross book value used instead of replacement cost, if gross book value is higher. d. Replacement cost used instead of liquidation value, if replacement cost is higher.
Homework Answers
option:- b
If a company is new, its assets will be new as well. In the early years of an asset’s life, accelerated depreciation will reduce the net book value more than straight-line depreciation.
As a result, the asset/investment amount will be lower and the overall ROI will be higher.
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Ready Products Inc. operates two divisions, each with its own manufacturing facility. The accounting system reports...
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For the Year Ended December 31, 2019 (000s)
Revenues
$
1,700
Operating costs
1,020
Operating income
$
680
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Operating costs
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The Ste. Marie Division of Pacific Media Corporation just started operations. It purchased depreciable assets costing...
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Ready Products Inc. operates two divisions, each with its own
manufacturing facility. The accounting system reports the following
data for 2019:
HEALTH CARE PRODUCTS DIVISION
Income Statement
For the Year Ended December 31, 2019 (000s)
Revenues
$
1,700
Operating costs
1,020
Operating income
$
680
COSMETICS DIVISION
Income Statement
For the Year Ended December 31, 2019 (000s)
Revenues
$
1,260
Operating costs
610
Operating income
$
650
Ready estimates the useful life of each manufacturing facility
to be 21 years....
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The
Ste. Marie Division of Pacific Media Corporation just started
operations. It purchased depreciable assets costing $45million and
having a four-year expected life, after which the assets can be
salvaged for $9 million. In addition, the division has $45 million
in assets that are not depreciable. After four years, the division
will have $45 million available from these nondepreciable assets.
This means that the division has invested $90 million in assets
with a salvage value of $54 million.Annual depreciation is...
The Ste. Marie Division of Pacific Media Corporation just started operations. It purchased depreciable assets costing $35 million and having a four-year expected life, after which the assets can be salvaged for $7 million. In addition, the division has $35 million in assets that are not depreciable. After four years, the division will have $35 million available from these nondepreciable assets. This means that the division has invested $70 million in assets with a salvage value of $42 million. Annual...
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