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Give step-by-step solution with explanation and final answer:ies a = i ASR bY Exercise 14-47 (Algo) Compare Current Cost to Historical Cost (LO 14-2,8) ~The Street Division of Labrosse Logistics Just started operations. It purchased depreciable assets costing $38.0 mil lionand havinga * fouryear expected life, after which the assets can be salvaged for $7.60 million. In addition, the division has $38.0 mil ion In assets th L080, are notdepreciable. After four years, the division will have $38.0 million available from these nondepreciable assets. Thi Tea nsthat ~~ thedivision has invested $76.0 million in assets with a salvage value of $45.60 million. Annual operating cash flows are $14.0 ommend 09k In computing ROI this division uses end-of-year asset values In the denominator. Depreciation is computed on a straight-line basis, Nay recognizing the salvage values noted. Ignore taxes. Bann rar og 5 Coe In computing ROL, this division uses end-of-year asset values. Assume that all cash flows increase 10 percent at the end of year. This has the following effect on the assets’ replacement cost and annual cash flows: Tn Fa End of 5 7 HAE BR BE Replacement. Cost wom EE Le a 1 $76,000,000 x 1.1 - $83,600,000 $14,000,000 x 1.1 = $15,400,000 EERE 2 $83,600,000 x 1.1 = $91,960,000 $15,408,000 x 1.1 = $16,948,008 HER Depreciation is as follows. SB BEYER Eon the Year “Accumulated” ay 1 $ 8,360,000 $8,360,000 (= 10% x $83,600,000) ed 2 9,196,000 18,392,000 (= 26% x 91,960,000) Artie 3 10,115,600 30,346,500 os 4 11,127,160 44,508,640 dee Note that “accumulated” depreciation is 10 percent of the gross book value of depreciable assets after one year, 20 percent fief two Er PONY RT 2k a - ou ¢ Prev 8of10 HE Next > = EE. Year For the Year "Accumulated" 1 $ 8,360,000 $8,360,000 (~ 10% x $83,600,000) 2 9,196,000 18,392,000 (= 20% x 91,960,000) 3 10,115, 600 30,346,800 a 11,127,160 44,508,640 x Note that "accumulated" depreciation is 10 percent of the gross book value of depreciable assets after one year, 20 percent after two years, and so forth. Required: a. &b. Compute ROI using historical cost, net book value and gross book value. &. ® I [¥ [ Q Search L] p L a \ RE X 3 I C omplete this question by entering your answers in the tabs below. ge Se 5 25, Req A and B | Req Cand D 2 2 Ta | Compute ROI using historical cost, net book value and gross book value. CE Note: Enter your answers as a percentage rounded to 2 decimal place (ie, 32.10). hedo ¢ Prev 8 of10 == ' Next >

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Give step-by-step solution with explanation and final answer:Uploaded ImageUploaded ImageUploaded Imageies a = i ASR bY Exercise 14-47 (Algo) Compare Current Cost to Historical Cost (LO 14-2,8) ~The Street Division of Labrosse Logistics Just started operations. It purchased depreciable assets costing $38.0 mil lionand havinga * fouryear expected life, after which the assets can be salvaged for $7.60 million. In addition, the division has $38.0 mil ion In assets th L080, are notdepreciable. After four years, the division will have $38.0 million available from these nondepreciable assets. Thi Tea nsthat ~~ thedivision has invested $76.0 million in assets with a salvage value of $45.60 million. Annual operating cash flows are $14.0 ommend 09k In computing ROI this division uses end-of-year asset values In the denominator. Depreciation is computed on a straight-line basis, Nay recognizing the salvage values noted. Ignore taxes. Bann rar og 5 Coe In computing ROL, this division uses end-of-year asset values. Assume that all cash flows increase 10 percent at the end of year. This has the following effect on the assets’ replacement cost and annual cash flows: Tn Fa End of 5 7 HAE BR BE Replacement. Cost wom EE Le a 1 $76,000,000 x 1.1 - $83,600,000 $14,000,000 x 1.1 = $15,400,000 EERE 2 $83,600,000 x 1.1 = $91,960,000 $15,408,000 x 1.1 = $16,948,008 HER Depreciation is as follows. SB BEYER Eon the Year “Accumulated” ay 1 $ 8,360,000 $8,360,000 (= 10% x $83,600,000) ed 2 9,196,000 18,392,000 (= 26% x 91,960,000) Artie 3 10,115,600 30,346,500 os 4 11,127,160 44,508,640 dee Note that “accumulated” depreciation is 10 percent of the gross book value of depreciable assets after one year, 20 percent fief two Er PONY RT 2k a - ou ¢ Prev 8of10 HE Next > = EE. Year For the Year "Accumulated" 1 $ 8,360,000 $8,360,000 (~ 10% x $83,600,000) 2 9,196,000 18,392,000 (= 20% x 91,960,000) 3 10,115, 600 30,346,800 a 11,127,160 44,508,640 x Note that "accumulated" depreciation is 10 percent of the gross book value of depreciable assets after one year, 20 percent after two years, and so forth. Required: a. &b. Compute ROI using historical cost, net book value and gross book value. &. ® I [¥ [ Q Search L] p L a \ RE X 3 I C omplete this question by entering your answers in the tabs below. ge Se 5 25, Req A and B | Req Cand D 2 2 Ta | Compute ROI using historical cost, net book value and gross book value. CE Note: Enter your answers as a percentage rounded to 2 decimal place (ie, 32.10). hedo ¢ Prev 8 of10 == ' Next >

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Asked by: Nishant Saini
Created at: 2025-09-28 08:03:48

Final Answer:

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Let's solve the question step-by-step as required: ## **Step 1: Gather Data** ### **A. Asset and Cash Flow Information** - Depreciable assets (cost): **$38,000,000** - Nondepreciable assets: **$38,000,000** - Total assets: **$76,000,000** - Salvage value (after 4 years): **$7,600,000** - Annual operating cash flows: **$14,000,000** - Depreciable asset life: **4 years** - Depreciation method: **straight-line** ### **B. Depreciation Table (from image)** - Year 1: $8,360,000 (accumulated: $8,360,000) - Year 2: $9,196,000 (accumulated: $18,392,000) - Year 3: $10,115,600 (accumulated: $30,346,800) - Year 4: $11,127,160 (accumulated: $44,508,640) ### **C. Book Values** - **Gross Book Value**: The original cost of depreciable + nondepreciable assets = **$76,000,000** - **Net Book Value**: Gross Book Value - Accumulated Depreciation --- ## **Step 2: ROI Calculation Formula** \[ \text{ROI} = \frac{\text{Annual Operating Cash Flow}}{\text{Denominator}} \] Denominator options: - **Gross Book Value**: $76,000,000 (each year) - **Net Book Value**: Gross Book Value - Accumulated Depreciation (from table) --- ## **Step 3: Yearly Calculations** ### **A. Accumulated Depreciation (from table)** | Year | Accumulated Depreciation | |------|-------------------------| | 1 | $8,360,000 | | 2 | $18,392,000 | | 3 | $30,346,800 | | 4 | $44,508,640 | ### **B. Net Book Value** \[ \text{Net Book Value} = \$76,000,000 - \text{Accumulated Depreciation} \] | Year | Net Book Value | |------|-----------------------| | 1 | $67,640,000 | | 2 | $57,608,000 | | 3 | $45,653,200 | | 4 | $31,491,360 | --- ## **Step 4: ROI Calculations** ### **A. Using Net Book Value** \[ \text{ROI}_{\text{Net}} = \frac{14,000,000}{\text{Net Book Value}} \] ### **B. Using Gross Book Value** \[ \text{ROI}_{\text{Gross}} = \frac{14,000,000}{76,000,000} \] --- ### **Calculate Each Year** #### **Year 1** - Net Book Value: $67,640,000 - ROI (Net): \( \frac{14,000,000}{67,640,000} \times 100 = 20.70\% \) - ROI (Gross): \( \frac{14,000,000}{76,000,000} \times 100 = 18.42\% \) #### **Year 2** - Net Book Value: $57,608,000 - ROI (Net): \( \frac{14,000,000}{57,608,000} \times 100 = 24.30\% \) - ROI (Gross): 18.42% #### **Year 3** - Net Book Value: $45,653,200 - ROI (Net): \( \frac{14,000,000}{45,653,200} \times 100 = 30.67\% \) - ROI (Gross): 18.42% #### **Year 4** - Net Book Value: $31,491,360 - ROI (Net): \( \frac{14,000,000}{31,491,360} \times 100 = 44.49\% \) - ROI (Gross): 18.42% --- ## **Step 5: Fill the Table** | | **Net Book Value** | **Gross Book Value** | |-------------|-------------------|---------------------| | **Year 1** | 20.70% | 18.42% | | **Year 2** | 24.30% | 18.42% | | **Year 3** | 30.67% | 18.42% | | **Year 4** | 44.49% | 18.42% | --- ## **Final Answers** **Historical Cost ROI:** | Year | Net Book Value | Gross Book Value | |--------|----------------|-----------------| | Year 1 | 20.70% | 18.42% | | Year 2 | 24.30% | 18.42% | | Year 3 | 30.67% | 18.42% | | Year 4 | 44.49% | 18.42% | --- If you need the part for "current cost" (replacement cost), let me know!

Question:

provide explanation for each step in 3 lines

This is AI generated Response.
Asked by: Nishant Saini
Created at: 2025-09-28 09:03:50

Final Answer:

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# Step-by-Step Solution Explanation ## Step 1: Gather Data We collected the necessary information about the division's assets, including their costs, expected life, salvage value, and annual cash flows. This data serves as the foundation for calculating ROI. ## Step 2: ROI Calculation Formula The formula for ROI was defined, highlighting that it is derived from the annual operating cash flow divided by a denominator (either net or gross book value). This clear structure is essential for the subsequent calculations. ## Step 3: Yearly Calculations We established a table for accumulated depreciation over four years, using the straight-line method. Additionally, we calculated the net book value by subtracting accumulated depreciation from the gross book value for each year. ## Step 4: ROI Calculations We computed ROI for both net and gross book values using the previously defined formula. This involved substituting the annual operating cash flow into the formula in conjunction with the calculated asset values. ## Step 5: Fill the Table A summary table was created to show the calculated ROIs for net and gross book values across four years. This table provides a clear and concise comparison of ROI results. ## Final Answers The final ROI percentages for each year based on net and gross book values were presented. These results offer insights into the division's financial performance using historical costs.

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