Computing return on assets

Reference no: EM13118974

In January 1999, a company was formed. Total assets were $500,000, of which $300,000 consisted of depreciable fixed assets. The company uses straight-line depreciation, and in 1999 it estimated its fixed assets to have useful lives of 10 years. After tax, income has been $26,000 per year each of the last 10 years. Other assets have not changed since 1999.

Provide formulas and procedures to:

(a) Compute return on assets as year-end for 1999, 2001, 2004, 2006, and 2008. use $26,000 in the numberator for each year.

(b) To what do you attribute the phenomenon in part (a).

Reference no: EM13118974

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