Hansaben The Street Division of Labrosse Logistics Just started operations. It purchased depreciable assets costing $41.5 million and having afour-year expected life, after which the assets can be salvaged for $8.3 million. In addition, the division has $41.5 million in assets thatare not depreciable. After four years, the division will have $41.5 million avallable from these non depreciable assets. This means thatthe division has Invested $83 million in assets with a salvage value of $49.8 million. Annual operating cash flows are $13.1 million. Incomputing ROI, this division uses end-of-year asset values in the denominator. Depreciation is computed on a straight-line basis,recognizing the salvage values noted. Ignore taxes.Required:a. & b. Compute ROI, using net book value and gross book value for each year.Note: Enter your answers as a percentage rounded to 2 decimal places (l.e., 32.10).ROINet Book ValueYear 115.66%Year 217.40%Year 319.58%Year 422.38%Gross Book Value15.66 X%15.66 x %15.66%15.66%

Certainly! Let's compute the Return on Investment (ROI) for each year using both net book value and…

Answered: The Street Division of Labrosse…

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter11: Long-term Assets

Section: Chapter Questions

Problem 15PB: Urquhart Global purchases a building to house its administrative offices for $500,000. The best...

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The Scampini Supplies Company recently purchased a new delivery truck. The new truck cost $22,500, and it is expected to generate net after-tax operating cash flows, including depreciation, of $6,250 per year. The truck has a 5-year expected life. The expected salvage values after tax adjustments for the truck are given here. The company’s cost of capital is 10%. Should the firm operate the truck until the end of its 5-year physical life? If not, then what is its optimal economic life? Would the introduction of salvage values, in addition to operating cash flows, ever reduce the expected NPV and/or IRR of a project?
Utica Machinery Company purchases an asset for 1,200,000. After the machine has been used for 25,000 hours, the company expects to sell the asset for 150,000. What is the depreciation rate per hour based on activity?
Urquhart Global purchases a building to house its administrative offices for $500,000. The best estimate of the salvage value at the time of purchase was $45,000, and it is expected to be used for forty years. Urquhart uses the straight-line depreciation method for all buildings. After ten years of recording depreciation, Urquhart determines that the building will be useful for a total of fifty years instead of forty. Calculate annual depreciation expense for the first ten years. Determine the depreciation expense for the final forty years of the assets life, and create the journal entry for year eleven.
Alfredo Company purchased a new 3-D printer for $900,000. Although this printer is expected to last for ten years, Alfredo knows the technology will become old quickly, and so they plan to replace this printer in three years. At that point, Alfredo believes it will be able to sell the printer for $15,000. Calculate yearly depreciation using the double-declining-balance method.
Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $6,000 and is expected to be driven for 125,000 miles. Montello uses the units-of-production depreciation method, and in year one it expects to use the truck for 26,000 miles. Calculate the annual depreciation expense.
Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $6,000 and is expected to be driven for 125,000 miles. Montello uses the units-of-production depreciation method, and in year one the company expects the truck to be driven for 26,000 miles; in year two, 30,000 miles; and in year three, 40,000 miles. Consider how the purchase of the truck will impact Montellos depreciation expense each year and what the trucks book value will be each year after depreciation expense is recorded.
The Street Division of Labrosse Logistics just started operations. It purchased depreciable assets costing $36.9 million and having a four-year expected life, after which the assets can be salvaged for $7.38 million. In addition, the division has $36.9 million in assets that are not depreciable. After four years, the division will have $36.9 million available from these nondepreciable assets. This means that the division has invested $73.8 million in assets with a salvage value of $44.28 million. Annual operating cash flows are $12.9 million. In computing ROI, this division uses end-of-year asset values in the denominator. Depreciation is computed on a straight-line basis, recognizing the salvage values noted. Ignore taxes. In computing ROI, this division uses end-of-year asset values. Assume that all cash flows increase 10 percent at the end of each year. This has the following effect on the assets’ replacement cost and annual cash flows: End of Year Replacement Cost Annual Cash…

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