The Lasorda Company Provided the Following Information The Operating Income Before Depreciation During Each of the Three

Essay

The Lasorda Company provided the following information: $\begin{array} { l } \text { Cost of machine}&\$300,000 \\ \text {Life in years }&\text {3 YEARS } \\ \text {Residual value }& \text {zero }\\ \text { Depreciation method}& \text { stright-line}\\\end{array}$
The operating income before depreciation during each of the three years the machine was in use was $150,000.
a. Compute the rate of return on the average investment for each of the three years using the net book value.
b. Compute the rate of return on the average investment for each of the three years using the gross book value.