Please tell why scrap value is added to average capital investment?
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Calculation of ARR
5y ago#1Because we are trying to find the average SOFP value of the asset, and the average is the (initial cost + the scrap value) / 2
I do explain this, and the reason for it, in my free lectures on investment appraisal.
The lectures are a complete free course for Paper FM and cover everything needed to pass the exam well.
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