The Street Division of Labrosse Logistics Just started operations. It purchased depreciable assets costing $41.5 million and having a four-year expected life, after which the assets can be salvaged for $8.3 million. In addition, the division has $41.5 million in assets that are not depreciable. After four years, the division will have $41.5 million avallable from these non depreciable assets. This means that the division has Invested $83 million in assets with a salvage value of $49.8 million. Annual operating cash flows are $13.1 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. 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). ROI Net Book Value Year 1 15.66% Year 2 17.40% Year 3 19.58% Year 4 22.38% Gross Book Value 15.66 X% 15.66 x % 15.66% 15.66%

The Street Division of Labrosse Logistics Just started operations. It purchased depreciable assets costing $41.5 million and having a four-year expected life, after which the assets can be salvaged for $8.3 million. In addition, the division has $41.5 million in assets that are not depreciable. After four years, the division will have $41.5 million avallable from these non depreciable assets. This means that the division has Invested $83 million in assets with a salvage value of $49.8 million. Annual operating cash flows are $13.1 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. 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). ROI Net Book Value Year 1 15.66% Year 2 17.40% Year 3 19.58% Year 4 22.38% Gross Book Value 15.66 X% 15.66 x % 15.66% 15.66%

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 22P: The Scampini Supplies Company recently purchased a new delivery truck. The new truck cost $22,500,...

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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?
The Street Division of Labrosse Logistics just started operations. It purchased depreciable assets costing $45.5 million and having a four-year expected life, after which the assets can be salvaged for $9.1 million. In addition, the division has $45.5 million in assets that are not depreciable. After four years, the division will have $45.5 milion available from these non depreciable assets. This means that the division has invested $91 million in assets with a salvage value of $54.6 million. Annual operating cash flows are $13.9 million. In computing ROI, this division uses beginning-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. Note: Enter your answers as a percentage rounded to 2 decimal place (i.e.. 32.10). Year 1 Year 2 Year 3 Year 4 ROI Net Book Value Gross Book Value % % % % % % % %
The Street Division of Labrosse Logistics just started operations. It purchased depreciable assets costing $37.0 million and having a four- year expected life, after which the assets can be salvaged for $7.4 million. In addition, the division has $37.0 million in assets that are not depreciable. After four years, the division will have $37.0 million available from these non depreciable assets. This means that the division has invested $74 million in assets with a salvage value of $44.4 million. Annual operating cash flows are $12.2 million. In computing ROI, this division uses beginning-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.
The Street Division of Labrosse Logistics just started operations. It purchased depreciable assets costing $38.5 million and having a four-year expected life, after which the assets can be salvaged for $7.7 million. In addition, the division has $38.5 million in assets that are not depreciable. After four years, the division will have $38.5 million available from these non depreciable assets. This means that the division has invested $77 million in assets with a salvage value of $46.2 million. Annual operating cash flows are $12.5 million. In computing ROI, this division uses beginning-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. Note: Enter your answers as a percentage rounded to 2 decimal place (i.e., 32.10). Year 1 Year 2 Year 3 Year 4 > Answer is complete but not entirely correct. Net Book Value 32.47 % 40.58 X…
The Street Division of Labrosse Logistics just started operations. It purchased depreciable assets costing $37.5 million and having a four-year expected life, after which the assets can be salvaged for $7.5 million. In addition, the division has $37.5 million in assets that are not depreciable. After four years, the division will have $37.5 million available from these non depreciable assets. This means that the division has invested $75 million in assets with a salvage value of $45.0 million. Annual operating cash flows are $12.3 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. 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). Answer is complete but not entirely ROI Net Book Value Gross Book Value Year 1 18.22 % 16.40%…
The Street Division of Labrosse Logistics just started operations. It purchased depreciable assets costing $38.0 million and having a four-year expected life, after which the assets can be salvaged for $7.60 million. In addition, the division has $38.0 million in assets that are not depreciable. After four years, the division will have $38.0 million available from these nondepreciable assets. This means that the division has invested $76.0 million in assets with a salvage value of $45.60 million. Annual operating cash flows are $14.0 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 1 2 3 4 Depreciation is as…
The Street Division of Labrosse Logistics just started operations. It purchased depreciable assets costing $40.5 million and having a four-year expected life, after which the assets can be salvaged for $8.1 million. In addition, the division has $40.5 million in assets that are not depreciable. After four years, the division will have $40.5 million available from these non depreciable assets. This means that the division has invested $81 million in assets with a salvage value of $48.6 million. Annual operating cash flows are $12.9 million. In computing ROI, this division uses beginning-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. Note: Enter your answers as a percentage rounded to 2 decimal place (i.e., 32.10). Year 1 Year 2 Year 3. Year 4 ROI Net Book Value % % % % Gross Book Value % % % %
The Street Division of Labrosse Logistics just started operations. It purchased depreciable assets costing $37.5 million and having a four-year expected life, after which the assets can be salvaged for $75 million. In addition, the division has $375 milion in assets that are not depreciable. After four years, the division will have $375 million available from these non depreciable assets. This means that the division has invested $75 milion in assets with a salvage value of $45.0 million. Annual operating cash flows are $12.3 million. In computing ROI, this division uses beginning 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 Note: Enter your answers as a percentage rounded to 2 decimal place (ie, 32.10). Year 1 Year 2 Year 3 Your 4 Answer is complete but not entirely correct. ROI Net Book Value 1822 18 22 20.50 23 43…
The Street Division of Labrosse Logistics Just started operations. It purchased depreclable assets costing $37.0 million and having a four-year expected life, after which the assets can be salvaged for $7.40 million. In addition, the division has $37.0 million in assets that are not depreclable. After four years, the division will have $37.0 million available from these nondepreciable assets. This means that the division has Invested $74.0 million in assets with a salvage value of $44.40 million. Annual operating cash flows are $13.0 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 1 2 Replacement Cost $74,000,000 x…
The Street Division of Labrosse Logistics 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 non depreciable assets. This means that the division has invested $72 million in assets with a salvage value of $43.2 million. Annual operating cash flows are $12 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. Assume that the company uses an 8 percent cost of capital. Required: a. Compute residual income, using net book value for each year. b. Compute residual income, using gross book value for each year. Note: For all the requirements, enter your answers in thousands of dollars.…
The Street Division of Labrosse Logistics 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 operating cash flows are $12 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. Assume that the company uses an 8 percent cost of capital. Required: a. Compute residual income, using net book value for each year. b. Compute residual income, using gross book value for each year. Note: For all the requirements, enter your answers in thousands of dollars.…
The Ste. Marie Division of Pacific Media Corporation just started operations. It purchased depreciable assets costing $52 million and having a four-year expected life, after which the assets can be salvaged for $10.4 million. In addition, the division has $52 million in assets that are not depreciable. After four years, the division will have $52 million available from these nondepreciable assets. This means that the division has invested $104 million in assets with a salvage value of $62.4 million. Annual depreciation is $10.4 million. Annual operating cash flows are $25 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: a. & b. Compute ROI, using net book value and gross book value. (Enter your answers as a percentage rounded to 1 decimal place (i.e., 32.1).)