Adinda Dewi Putri

1206228733
Problem 4-9
Known from the case:
Total cost = $1,6 billion
Based on assumption that construction is completed and the facility
is opened for business by Jan 1, Year 1
Annual income before depreciation and taxes:
o Year 1 = $50 million
o Year 2 = $70 million
o Year 3 = $75 million
Tax rate = 25%
Questions: Return on Assets (RoA) for Year 1, Year 2, and Year 3, if the
useful life:
a) 25 years
Answer:
Depreciation/year =

$ 1,6 billion
=$ 64 million
25 years

Year 1
Annual income
$50 million
Depreciation
$(64 million)
_____________________________ EBT
$(14 million)
Tax (25%)
$(3,5 million)
_____________________________ Net Income (Loss)
$(10,5 million)
Year 2
Annual income
$70 million
Depreciation
$(64 million)
_____________________________ EBT
$6 million
Tax (25%)
$(1,5 million)
_____________________________ Net Income (Loss)
$4,5 million
Year 3
Annual income
$75 million
Depreciation
$(64 million)
_____________________________ EBT
$11 million
Tax (25%)
$(2,75 million)
_____________________________ Net Income (Loss)
$8,25 million
Net Assets:
Year 1 = $1,6 billion - $64 million = $1,536 million
Year 2 = $1,536 million - $64 million = $1,472 million
Year 3 = $1,472 million - $64 million = $1,408 million

Adinda Dewi Putri

1206228733
Return on Assets

Return on Assets:
$ ( 10,5 million )
Year 1 =
$ 1,536 million

= - 0,683594%

Year 2 =

$ 4,5 million
=0,305707
$ 1,472 million

Year 3 =

$ 8,25 million
=0,585938
$ 1,408 million

b) 15 years
Answer:
Depreciation/year =

Net Income
Total Net Assets

$ 1,6 billion
=$ 106,67 million
15 years

Year 1
Annual income
$50million
Depreciation
$(106,67 million)
_____________________________ EBT
$(56,67 million)
Tax (25%)
$(14,1675 million)
_____________________________ Net Income (Loss)
$(42,5025 million)
Year 2
Annual income
$70 million
Depreciation
$(106,67 million)
_____________________________ EBT
$(36,67 million)
Tax (25%)
$(9,1675 million)
_____________________________ Net Income (Loss)
$(27,5025 million)
Year 3
Annual income
$75 million
Depreciation
$(106,67 million)
_____________________________ EBT
$(31,67 million)
Tax (25%)
$(7,9175 million)
_____________________________ Net Income (Loss)
$(23,7525 million)
Net Assets:
Year 1 = $1,6 billion - $106,67 million = $1.493,33 million
Year 2 = $1.493,33 million - $106,67 million = $1.386,66 million
Year 3 = $1.386,66 million - $106,67 million = $1.279,99 million

Adinda Dewi Putri

1206228733
Return on Assets

Return on Assets:
$ ( 42,5025million )
Year 1 =
$ 1.493,33 million
Year 2 =
Year 3 =

Net Income
Total Net Assets

= 2,846156%

$ (27,5025 million)
=1,983363
$ 1.386,66 million
$ (23,7525 million)
=1,855679
$ 1.279,99 million

c) 10 years
Answer:
Depreciation/year =

$ 1,6 billion
=$ 160 million
1 0 years

Year 1
Annual income
$50million
Depreciation
$(160 million)
_____________________________ EBT
$(110 million)
Tax (25%)
$(27,5 million)
_____________________________ Net Income (Loss)
$(82,5 million)
Year 2
Annual income
$70 million
Depreciation
$(160 million)
_____________________________ EBT
$(90 million)
Tax (25%)
$(22,5 million)
_____________________________ Net Income (Loss)
$(67,5 million)
Year 3
Annual income
$75 million
Depreciation
$(160 million)
_____________________________ EBT
$(85 million)
Tax (25%)
$(21,25 million)
_____________________________ Net Income (Loss)
$(63,75 million)
Net Assets:
Year 1 = $1,6 billion - $160 million = $1.440 million
Year 2 = $1.440 million - $160 million = $1.280 million

Adinda Dewi Putri

1206228733
Year 3 = $1.280 million - $160 million = $1.120 million
Net Income
Return on Assets
Total Net Assets
Return on Assets:
$ (82,5 million)
Year 1 =
$ 1.440 million

= 5,729167%

Year 2 =

$ (67,5 million)
=5,273438
$ 1.280 millio n

Year 3 =

$ (63,75 million)
=5,691964
$ 1.120 million

d) 1 year
Answer:
Depreciation/year =

$ 1,6 billion
=$ 1,6 billion=$ 1.600 million
1 year

Year 1
Annual income
$50 million
Depreciation
$(1.600 million)
_____________________________ EBT
$(1.550 million)
Tax (25%)
$(387,5 million)
_____________________________ Net Income (Loss)
$(1162,5 million)
Year 2
Annual income
$70 million
Depreciation
$0
_____________________________ EBT
$70 million
Tax (25%)
$17,5 million
_____________________________ Net Income (Loss)
$52,5 million
Year 3
Annual income
$75 million
Depreciation
$0
_____________________________ EBT
$75 million
Tax (25%)
$(18,75 million)
_____________________________ Net Income (Loss)
$56,25 million
Net Assets:
Year 1 = $1,6 billion - $1,6 billion = $0

Adinda Dewi Putri

1206228733
Year 2 = $0 - $0 = $0
Year 3 = $0 - $0 = $0
Return on Assets

Return on Assets:
$0
Year 1 =
=
$0
Year 2 =
Year 3 =

$0
=
$0
$0
=
$0

Net Income
Total Net Assets