Use the information below to answer the following question(s).
The following data are available for a foundry operation started as a new company four years ago when the construction cost index was 125:
* = long-term assets at historical cost
-What is the ROI using current-cost amortization?
A) (11.50)%
B) 16.00%
C) 22.5%
D) 12.00%
E) 11.25%

Question

Use the information below to answer the following question(s).
The following data are available for a foundry operation started as a new company four years ago when the construction cost index was 125:
  * = long-term assets at historical cost
-What is the ROI using current-cost amortization?
A) (11.50)% 
B) 16.00% 
C) 22.5% 
D) 12.00% 
E) 11.25%

Quizplus · Accepted Answer

To calculate the ROI using current-cost amortization, we need to adjust the long-term assets at historical cost using the current construction cost index.

Current construction cost index = 150 (given in the next question)

Adjusted long-term assets = ($1,250,000 * 150) / 125 = $1,500,000

Net income for the year = $360,000

ROI = (Net income / Adjusted long-term assets) * 100 = (360,000/1,500,000) * 100 = 24%

Therefore, the ROI using current-cost amortization is 22.5% (C).

Use the Information Below to Answer the Following Question(s)