Compute ROI using net book value and gross book value

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Question - The Ste. Marie Division of Pacific Media Corporation just started operations. It purchased depreciable assets costing $36 million and having a four-year expected life, after which the assets can be salvaged for $7.2 million. In addition, the division has $36 million in assets that are not depreciable. After four years, the division will have $36 million available from these nondepreciable assets. This means that the division has invested $72 million in assets with a salvage value of $43.2 million. Annual depreciation is $7.2 million. Annual operating cash flows are $21 million. Depreciation is computed on a straight-line basis, recognizing the salvage values noted. Ignore taxes. Assume that the division uses beginning-of-year asset values in the denominator for computing ROI.

Required - Compute ROI, using net book value and gross book value.

Reference no: EM132574207

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