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Compute the roi of each division using total assets

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Reference no: EM13902934

ROI computations comparing net and gross book value. The following information relates to the operating performance of two divisions of World Electronics, Inc., for last year.

                                                                        U.S. Division            Australian Division

Operating Profit                                                  $ 3,000,000            $ 4,000,000

Total Assets (at gross acquisition cost)                 20,000,000             50,000,000
Total Assets (net of accumulated depreciation)      15,000,000              15,000,000

a. Compute the return on investment (ROI) of each division, using total assets at gross book value as the investment base.

b. Compute the ROI of each division, using total assets net of accumulated depreciation (net book value) as the investment base.

c. Which of the two measures do you think gives the better indication of operating per- formance? Explain your reasoning.

Reference no: EM13902934

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