Question

which of the following statements provide(s) an argument in favour of including only a plant's net book value rather than gross book value as part of operating assets in the roi computation? i. net book value is consistent with how plant and equipment items are reported on a balance sheet. ii. net book value is consistent with the computation of operating income, which includes amortization as an operating expense. iii. net book value allows roi to decrease over time as assets get older. question 15 options: a) i only. b) iii only. c) i and ii only. d) i and iii only.

Answer 1

Including a plant's net book value rather than gross book value in the ROI computation is consistent with how plant and equipment items are reported on a balance sheet and allows ROI to decrease over time as assets get older.

Step-by-step explanation:

The option that provides an argument in favor of including only a plant's net book value rather than gross book value as part of operating assets in the ROI (Return on Investment) computation is option d) i and iii only.

i. Net book value is consistent with how plant and equipment items are reported on a balance sheet. Gross book value includes the original cost of the asset without considering any accumulated depreciation.

Net book value, on the other hand, reflects the remaining value of the asset after deducting accumulated depreciation.

iii. Net book value allows ROI to decrease over time as assets get older. This is because as assets age, their values depreciate, and using the net book value accounts for this depreciation, giving a more accurate measure of return on investment.