Three Years Ago, One Division of the Calsone Enterprise Company $$\begin{array} { c c c } \text { Year } & { \text { Cash flows } } \\1 & \$ 600,000 \\2 & 700,000 \\3 & 810,000\end{array}$$

question 128

Essay

Three years ago, one division of the Calsone Enterprise Company purchased depreciable assets costing $2,000,000. The cash flows from these assets for the past three years have been:
$$\begin{array} { c c c } \text { Year } & { \text { Cash flows } } \\1 & \$ 600,000 \\2 & 700,000 \\3 & 810,000\end{array}$$
Calsone uses the straight-line depreciation method and the assets had an estimated useful life of 10 years with no salvage value. For return on investment (ROI) calculations, Calsone uses end-of-year balances.
Required:
a. What was the ROI for each year using historical cost and gross book value?
b. What was the ROI for each year using historical cost and net book value?

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