In determining the dollar amount to use for operating assets in the return on investment (ROI) calculation, companies will generally use either net book value or gross cost of the assets. Which of the following is not an argument for the use of net book value rather than gross cost?
A. It eliminates the depreciation method as a factor in ROI calculations.
B. It will result in a decrease of ROI each year.
C. It is consistent with how assets are reported on the balance sheet.
D. It encourages the replacement of old, worn-out equipment.
Answer: B
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Fill in the blank(s) with the appropriate word(s).
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