The Jones Company Purchased Assets Costing $200,000 Which Will Be $\begin{array} { r r r r r } & \text { Year } 1 & \text { Year 2 } & \text { Year 3 } & \text { Year 4 } \\\end{array}$

Multiple Choice

The Jones Company purchased assets costing $200,000 which will be depreciated over 5 years using straight-line depreciation and no salvage value. Jones also purchased land and other assets, which are not depreciable, at a cost of $200,000. It is estimated that in 5 years, the value of these assets will be unchanged. Assume that annual cash profits are $80,000 and, for return on investment (ROI) calculations, the company uses end-of-year asset values.
-
What is the ROI for each year using gross book value?
$\begin{array} { r r r r r } & \text { Year } 1 & \text { Year 2 } & \text { Year 3 } & \text { Year 4 } \\\end{array}$
A) $\begin{array} { r r r r r } & 10.0 \% & 9.5 \% &&& 8.0 \% & 7.9 \% \\\end{array}$
B) $\begin{array} { r r r r r } & 10.0 \% & 10.0 \% && 10.0 \% & 10.0 \% \\\end{array}$
C) $\begin{array} { r r r r r } & 12.5 \% & 11.0 \% && 12.0 \% & 15.0 \% \\\end{array}$
D) $\begin{array} { r r r r r } & 10.0 \% & 12.5 \% && 14.0 \% & 17.0 \%\end{array}$

A) Option A
B) Option B
C) Option C
D) Option D