Division a Has a Building with the Same Original Cost

question 49

Multiple Choice

Division A has a building with the same original cost as Division B,except that it was purchased four years before Division B's building.If both divisions have identical operating incomes and use the net book value approach for calculating return on investment (ROI) ,which of the following will be true?

• A)Both divisions will have the same ROI.
• B)Division B will have a higher ROI.
• C)Division A will have a higher ROI.
• D)More information is needed to answer this question.
• E)None of the answer choices is correct.

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Definitions:

Inflation Rate

The rise in the average price levels of goods and services within an economy over a given time frame.

Unemployment

The situation when individuals who are able and willing to work at current wage rates cannot find employment.

Inflation Expectations

The rate at which people expect the general price level of goods and services to rise in the future.

Housing and Financial Crisis

A period marked by severe disruptions in the availability of credit, widespread foreclosures, and plummeting housing prices, typically leading to a long-term economic downturn.