Return on investment

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February 1, 2016 at 3:04 pm #298861
sahalacca
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Q;a company has a nca of$460000 which will depriciated to nil on a straight line basis over 10 years.net current assets will be $ 75000.and annual profit will consistently be $30000.roi is measured as return on net asset
Required to calculate roi in the years 2 and 6
Please help to solve the question
February 2, 2016 at 8:28 am #298941
John Moffat
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You really should not be attempting questions for which you do not have an answer – that is not the way to learn 🙂

After 2 years, the NCA’s will be 460,000 – (2 x 46,000) = 368,000.
Therefore total assets = 368,000 + 75,000 = 443,000

Therefore the ROI = 30,000 / 443,000 = 6.77%

After 3 years, the NCA’s will be 460,000 – (3 x 46,000) = 322,000
Therefore total assets = 322,000 + 75,000 = 397,000
Therefore the ROI = 30,000 / 397,000 = 7.56%

You should now be able to calculate the other years yourself.
March 8, 2016 at 11:34 am #304327
John Moffat
Keymaster
- Topics: 57
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Profit is already after charging depreciation!!
It always is unless you are told otherwise.
(Depreciation is an expense in the Statement of profit or loss).
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