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

question 52

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.
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What is the ROI for each year using net book value?
$\begin{array} { l r r r r } & \text { Year } 1 & \text { Year 2 } & \text { Year 3 } & \text { Year 4 } \\\end{array}$
A) $\begin{array} { l r r r r } & 11.1 \% & 12.5 \% && 14.3 \% & 16.7 \% \\\end{array}$
B) $\begin{array} { l r r r r } & 10.0 \% & 10.0 \% && 10.0 \% & 10.0 \% \\\end{array}$
C) $\begin{array} { l r r r r } & 10.0 \% & 8.9 \% &&& 7.3 \% & 6.5 \% \\\end{array}$
D) $\begin{array} { l r r r r } & 11.1 \% & 11.5 \% && 12.9 \% & 12.3 \%\end{array}$

• A)\(\begin{array} { l r r r r } & 11.1 \% & 12.5 \% && 14.3 \% & 16.7 \% \\\end{array}\)
• B)\(\begin{array} { l r r r r } & 10.0 \% & 10.0 \% && 10.0 \% & 10.0 \% \\\end{array}\)
• C) \(\begin{array} { l r r r r } & 10.0 \% & 8.9 \% &&& 7.3 \% & 6.5 \% \\\end{array}\)
• D) \(\begin{array} { l r r r r } & 11.1 \% & 11.5 \% && 12.9 \% & 12.3 \%
• \end{array}\)
• A) Option A
• B) Option B
• C) Option C
• D) Option D

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Definitions:

dfWG

Degrees of freedom within groups, a term used in statistical analysis, particularly ANOVA, to indicate the number of independent pieces of information available to estimate variances within the groups.

Degrees of Freedom

A concept in statistics that refers to the number of values in a calculation that are free to vary without violating the constraints of the calculation.

Levels Minus One

In analysis of variance (ANOVA), it refers to the number of levels in a factor minus one, which dictates the number of comparisons that can be made.

Interaction Effect

Occurs in an analysis when the effect of one independent variable on a dependent variable differs across levels of another independent variable.