What is the ROI for each year of the asset life

Assignment Help Accounting Basics
Reference no: EM132691470

Question - Upper Division of Lower Company acquired an asset with a cost of $560,000 and a four-year life. The cash flows from the asset, considering the effects of inflation, were scheduled as follows.

Year

Cash Flow

1

$205,000

2

270,000

3

290,000

4

315,000

The cost of the asset is expected to increase at a rate of 10 percent per year, compounded each year. Performance measures are based on beginning-of-year gross book values for the investment base. Ignore taxes.

Required -

a. What is the ROI for each year of the asset's life, using a historical cost approach?

b. What is the ROI for each year of the asset's life if both the investment base and depreciation are determined by the current cost of the asset at the start of each year?

Reference no: EM132691470

Questions Cloud

What is the book value of the Investment in Entity Z : What is the book value of the Investment in Entity Z to be reported in the statement of financial position of Entity Y as of December 31, 2019
What is the amount of asset revaluation : After admission of ALLAN, the total capital will be $990,000 and ALLAN'S capital will be $210,000. What is the amount of asset revaluation
Illustrate horizontal and vertical analysis : Using the items from the comparative balance sheet of Gabi Gold Limited, illustrate horizontal and vertical analysis. Discuss results of each type of analysis
Illustrate a combined Statement of Income : Gain on fair value adjustments on equity investments 31,000. Illustrate a combined Statement of Income and Comprehensive Income for the year ended June 30, 2021
What is the ROI for each year of the asset life : What is the ROI for each year of the asset's life if both the investment base and depreciation are determined by the current cost of the asset
Prepare the year-end adjusting entry to account : Assuming Bear has a December 31 year end, prepare the year-end adjusting entry to account for accrued interest on the bonds
Prepare McBride cash flow statement for the year : Principal payments made on mortgage payable 8,500. Prepare McBride's cash flow statement for the year ended December 31, 2021, using the direct method
Compute the total variable cost : Sale price: P5000 per monitor, Direct materials cost: P1000 per unit and Direct labor cost: P550 per unit. Compute the total variable cost
What is the total australian dollar cash flow : Perth International has a plan to expand the business in China, India and Malaysia. What is the total Australian dollar (A$) cash flow for year-three

Reviews

Write a Review

Accounting Basics Questions & Answers

  How much control does fed have over this longer real rate

Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest.   How much control does the Fed have over this longer real rate?

  Coures:- fundamental accounting principles

Coures:- Fundamental Accounting Principles: - Explain the goals and uses of special journals.

  Accounting problems

Accounting problems,  Draw a detailed timeline incorporating the dividends, calculate    the exact Payback Period  b)   the discounted Payback Period. the IRR,  the NPV, the Profitability Index.

  Write a report on internal controls

Write a report on Internal Controls

  Prepare the bank reconciliation for company

Prepare the bank reconciliation for company.

  Cost-benefit analysis

Create a cost-benefit analysis to evaluate the project

  Theory of interest

Theory of Interest: NPV, IRR, Nominal and Real, Amortization, Sinking Fund, TWRR, DWRR

  Liquidity and profitability

Distinguish between liquidity and profitability.

  What is the expected risk premium on the portfolio

Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semiannual interest payments.

  Simple interest and compound interest

Simple Interest, Compound interest, discount rate, force of interest, AV, PV

  Capm and venture capital

CAPM and Venture Capital

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd