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how ROCE is 13.34% in June 2016 Q1 part IV

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA APM Exams › how ROCE is 13.34% in June 2016 Q1 part IV

  • This topic has 2 replies, 2 voices, and was last updated 8 years ago by aniza.
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    Posts
  • July 26, 2016 at 4:47 pm #329238
    aniza
    Member
    • Topics: 1
    • Replies: 4
    • ☆

    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 4.4

    The capital employed is $ 4.2

    I appreciate your answer Sir
    Regards

    July 27, 2016 at 6:33 pm #329891
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10597
    • ☆☆☆☆☆

    Per 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]

    July 28, 2016 at 11:54 am #329978
    aniza
    Member
    • Topics: 1
    • Replies: 4
    • ☆

    Thanks very much Ken

    I appreciate your help as always.

    regards

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