[Lighthaven]

Here’s the MCQ:

Minon, Inc. purchased a long-term asset on the last day of the current year. What are the effects of this purchase on return on investment and residual income?

The answer is they would both decrease.

I understand that completely. What I’m confused about it is something Peter Olinto mentioned in his explanation to this answer (this is one of the class questions).

He said that the purchase of the asset would increase both Assets and the NBV of Equity on the B/S. I’m confused as to how this would increase equity?

Any advice?

AUD - 83
REG - 81 (2x)
FAR - 78
BEC - 85

And that's all she wrote.