Raritan Ltd.’s ROI on a piece of recently acquired equipment was 16% using end-o
ID: 2552254 • Letter: R
Question
Raritan Ltd.’s ROI on a piece of recently acquired equipment was 16% using end-of-year net book value. The original cost of the equipment was $219681. Net income for the current year (before tax) from other assets was $296540. Accumulated depreciation on the new equipment at the beginning of the year was $13959, representing one-half year’s straight-line depreciation What is this year’s before-tax net income from the new equipment plus the other assets?
Select one:
a. $327222
b. $338389
c. $324989
d. $331689
Explanation / Answer
Answer c. $324,989
Accumulated depreciation on the new equipment at the beginning $13959, representing one-half year’s straight-line depreciation.
Depreciation for current full year will be 13959 x 2 = 27,918
Total Accumulated depreciation on the new equipment at the end will be 13959 + 27918 = 41,877
Current years end-of-year net book value will be 219681 - 41877 = 177,804
ROI on a piece of equipment = 16% x 177,804 = 28,44
Current year's before-tax net income from the new equipment plus the other assets = 28,449 + 296,540 = $324,989
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