One Division of the Marvin Educational Enterprises Has Depreciable Assets

One division of the Marvin Educational Enterprises has depreciable assets costing $4,000,000. The cash flows from these assets for the past three years have been:
$$\begin{array} { c l l } \text { Year } & { \text { Cash flows } } \\1 & \mathbf { \$ } 1,200,000 \\2 & \$ 1,400,000 \\3 & \$ 1,620,000\end{array}$$
The current (i.e., replacement) costs of these assets were expected to increase 25% each year.
-Marvin used the straight-line depreciation method and the estimated useful life is 10-years with no salvage value. For return on investment (ROI) calculations, Marvin uses end-of-year balances.
What is the ROI using current costs and gross book value?
$\begin{array} { l c c c } & \text { Year } 1 & \text { Year 2 } & \text { Year 3 } \\\end{array}$
A. $\begin{array} { l c c c } & 14.0 \% & 18.0 \% & 22.4 \% \\\end{array}$
B. $\begin{array} { l c c c } & 13.0 \% & 14.0 \% & 14.0 \% \\\end{array}$
C. $\begin{array} { l c c c } & 12.0 \% & 10.1 \% & 9.5 \% \\\end{array}$
D. $\begin{array} { l c c c } & 14.0 \% & 12.4 \% & 10.7 \%\end{array}$

A) Option A
B) Option B
C) Option C
D) Option D