Hardev The Street Division of Labrosse Logistics just started operations. It purchased depreciable assets costing $37.5 million and having afour-year expected life, after which the assets can be salvaged for $7.5 million. In addition, the division has $37.5 million in assets thaare not depreciable. After four years, the division will have $37.5 million available from these non depreciable assets. This means thathe division has invested $75 million in assets with a salvage value of $45.0 million. Annual operating cash flows are $12.3 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 (i.e., 32.10).ROINet Book Value Gross Book ValueYear 1%%Year 2%000%Year 3%%Year 4%%

a. Compute ROI using net book value for each year:Year 1:NBV = $37.5M - $7.5M = $30MGBV = $75M -…

Answered: The Street Division of Labrosse…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 18P

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