Analyse, with the help of calculations from the Dairy Division's proposal, how ROI can improve over time with the aging of assets.

ROI improves with age of the assets Since ROI is rate of earning as percentage of investment, hence while assets getting older the amount of investment reduced; resultantly if same productivity or efficiency is maintained then ROI improves. Same can be seen through calculations below that ROI improves from 34.68% in first year to 40.85%, and 49.69% respectively in second and third year. ROI for proposed expansion over years (Amount in ₹, round off to nearest rupee) Particulars Second Year Third Year a. Plant and equipment at beginning of year 1,48,75,000 1,22,50,000 b. Depreciation for year on the above plant and equipment (15%) 26,25,000 26,25,000 c. Net book value of plant and equipment at reporting date (a)-(b) 1,22,50,000 96,25,000 d. Net current assets (assumed to be constant) 25,00,000 25,00,000 e. Total relevant investment (c)+(d) 1,47,50,000 1,21,25,000 f. Contribution (assumed to be constant) 95,00,000 95,00,000 g. Fixed cost (assumed to be constant) 8,50,000 8,50,000 h. Net addition to earning (f)-(g)-(b) 60,25,000 60,25,000 i. ROI [(h)/(e)×100] 40.85% 49.69%