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Dear Sir
Would you please tell me how expected ROCE is 13.34% in June 2016 Q1 part IV
Demand scenario Low Medium High
Revenue ($m) 12.5 13 13.5
Probability (%) 20 50 30
Forecast operating Margin 4.1 4.3 4.4The capital employed is $ 4.2
I appreciate your answer Sir
RegardsPer the answer:
Demand scenarios Low Medium High
Revenue ($m) 12·5 13 13·5
Probability (%) 20 50 30
Forecast operating margin (%) 4·1 4·3 4·4
Forecast operating profit ($m) 0·5125 0·559 0·594 [=revenue x margin %]Expected profit = 20% x 0.5125 + 50% x 0.559 + 30% x 0.594 = 0.5602
New store cost 4.2 (note 2 of question)
ROCE = 100 x 0.5602/4.2 = 13.33 [I think 13.33 is correct and 13.34 is slightly wrong]
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