The Jones Company Purchased Assets Costing $200,000 Which Will Be

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.The 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 net book value? $$\begin{array} { | l | c | c | c | c | } \hline & \text { Year 1 } & \text { Year 2 } & \text { Year 3 } & \text { Year 4 } \\\hline \text { A. } & 11.1 \% & 12.5 \% & 14.3 \% & 16.7 \% \\\hline \text { B. } & 10.0 \% & 10.0 \% & 10.0 \% & 10.0 \% \\\hline \text { C. } & 10.0 \% & 8.9 \% & 7.3 \% & 6.5 \% \\\hline \text { D. } & 11.1 \% & 11.5 \% & 12.5 \% & 12.3 \% \\\hline\end{array}$$

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