Accounting rate of return (ROCE)

Hi John,

Here is the question from BPP

Investment $46,000
Lorry will last 4 Years and will be sold for $7,000
Depreciation charged on straight-line method

Operating profits/Losses
1. 16 500
2. 23 500
3. 13.500
4. (1 500)

I need to calculate ROCE using the average investment method.

So what I did:

a) Calculated average profit per annum:

$52,000 – $39,000= $13,000/4 = $3,250

b) Calculated average balance sheet value:

$46,000 + $7,000= $53,000/2 = $26,500

c) $3.250 / $26,500 = 0,12 = 12%

I was following my notes from your lecture. And the answer is wrong.

In BPP book in part a) $13,000 wasn’t divided by 4 and the answer actually is 49%.
So which one is correct?

This is very simple question and I don’t want to make mistakes on it. (I thought I was calculating it correctly)