QuestionJuly 20, 2025

When ROI is calculated using the gross cost of assets, replacing a fully depreciated asset with a comparably priced new asset will not adversely affect ROI. True False

When ROI is calculated using the gross cost of assets, replacing a fully depreciated asset with a comparably priced new asset will not adversely affect ROI. True False
When ROI is calculated using the gross cost of assets, replacing a fully depreciated asset with a comparably priced new asset will not adversely affect ROI.
True
False

Solution
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Answer

True Explanation 1. Define ROI ROI (Return on Investment) is calculated as \text{ROI} = \frac{\text{Net Profit}}{\text{Cost of Investment}}. 2. Analyze Asset Replacement Impact Replacing a fully depreciated asset with a new one at the same price keeps the gross cost constant. Since ROI uses gross cost, net profit remains unchanged, thus ROI is unaffected.

Explanation

1. Define ROI<br /> ROI (Return on Investment) is calculated as $\text{ROI} = \frac{\text{Net Profit}}{\text{Cost of Investment}}$.<br />2. Analyze Asset Replacement Impact<br /> Replacing a fully depreciated asset with a new one at the same price keeps the gross cost constant. Since ROI uses gross cost, net profit remains unchanged, thus ROI is unaffected.
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