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:

Excludable

A characteristic of a good or service that allows its owner to prevent others from using it, typically through the mechanism of property rights.

Rival in Consumption

A characteristic of a good whereby consumption by one individual prevents simultaneous consumption by another individual.

Rival in Consumption

A characteristic of goods whereby the consumption by one individual reduces the availability of the good for consumption by another individual.

Potato Chips

Thin slices of potato that are fried or baked until crisp and served as a snack.