The Following Information Was Presented by Shower Wonder Enterprises for an Asset

question 45

Multiple Choice

The following information was presented by Shower Wonder Enterprises for an asset purchased at the beginning of the previous year. $$\begin{array} { | l | r | } \hline \text { Original cost of the asset } & \$ 20,000 \\\hline \text { Useful life of the asset } & 10 \text { years } \\\hline \text { Cashflow annual operating protit } & \$ 4,000 \\\hline \text { Sabage value } & \$ - 0 - \\\hline\end{array}$$ What is the return on investment (ROI) assuming Shower Wonder (a) uses the straight-line method for depreciation and (b) average net book values to compute ROI?

• A) 21.1%.
• B) 20.0%.
• C) 22.2%.
• D) 11.76%.

---

Definitions:

Shares

Shares represent ownership units in a corporation or financial asset, granting shareholders a portion of the corporation's assets and profits.

Participating

Involvement or engagement in a particular activity, process, or venture.

Preferred Stock

A type of stock that grants holders certain advantages over common stock, often including fixed dividends and priority in asset liquidation.

Preferred Stock

A type of stock that gives holders preferential rights over common stockholders in terms of dividends and claims on assets.