ROCE Calculation

Hi Mike:

I’m doing F7 December 2016 exam paper. I’m really confused by part (b) in Question 32 ROCE calculation:

Revenue $89,300,000
Cost of sales $76,000,000
Gross profit $13,300,000

Equity $15,300,000
Non current liability
8% Loan notes $10,000,000

4% loan notes have been classified as a current liability due to their imminent redemption. As such, they should not be treated as long – term funding. However, they will be replaced immediately after redemption by 8% loan notes with the same nominal value, repayable in ten years’time.

ROCE = (13300,000 – 10,000,000)/ (15300,000 + 10,000,000)

I understand denominator part, but I don’t understand numerator part. Can you let me know if 10,000,000 is treated as operating expenses?

Many thanks