The Ste. Marie Division of Pacific Media Corporation just started operations. It purchased depreciable assets costing...

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The Ste. Marie Division of Pacific Media Corporation juststarted operations. It purchased depreciable assets costing $43.0million and having a four-year expected life, after which theassets can be salvaged for $8.6 million. In addition, the divisionhas $43.0 million in assets that are not depreciable. After fouryears, the division will have $43.0 million available from thesenondepreciable assets. This means that the division has invested$86.0 million in assets with a salvage value of $51.6 million.Annual depreciation is $8.6 million. Annual operating cash flowsare $21.7 million. In computing ROI, this division uses end-of-yearasset values in the denominator. Depreciation is computed on astraight-line basis, recognizing the salvage values noted. Ignoretaxes. Required: a. & b. Compute ROI, using net book value andgross book value for each year. (Enter your answers as a percentagerounded to 1 decimal place (i.e., 32.1).)

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Gross Value method

Year 1

Year 2

Year 3

Year 4

Net Value method

Year 1

Year 2

Year 3

Year 4

Depreciable asset value

Â Â Â Â Â Â Â Â 43.00

Â Â Â Â Â Â Â Â Â 43.00

Â Â Â Â Â Â 43.00

Total Gross Value

Â Â Â Â Â Â 86.00

Â Â Â Â Â Â 77.40

Â Â Â Â Â Â 68.80

Â Â Â Â Â Â 60.20

Non Depreciable asset value

Â Â Â Â Â Â Â Â 43.00

Â Â Â Â Â Â Â Â Â 43.00

Â Â Â Â Â Â 43.00

Annual depreciation

Â Â Â Â Â Â Â Â 8.60

Total Gross Value

Â Â Â Â Â Â Â Â 86.00

Â Â Â Â Â Â Â Â Â 86.00

Â Â Â Â Â Â 86.00

C=A+B

Net Gross Value

Â Â Â Â Â Â 77.40

Â Â Â Â Â Â 68.80

Â Â Â Â Â Â 60.20

Â Â Â Â Â Â 51.60

H=C-E

Net operating cash flows

Â Â Â Â Â Â Â Â 13.10

Â Â Â Â Â Â Â Â Â 13.10

Â Â Â Â Â Â 13.10

Net operating cash flows

Â Â Â Â Â Â 13.10

ROI

15.23%

G=F/C

ROI

16.93%

19.04%

21.76%

25.39%

I=F/H

Annual operating cash flows

Â Â Â Â Â Â Â Â 21.70

Less: Annual depreciation

Â Â Â Â Â Â Â Â Â Â Â 8.60

Net operating cash flows

Â Â Â Â Â Â Â Â 13.10

F=D-E

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