Investment Appraisal

They are similar (in that they are both accounting measures), but they are not the same.

ROCE is a measure of performance of the company as a whole.

ARR is a method used to appraise individual projects.

I am surprised if BPP do not mention in (ARR in the section on investment appraisal and ROCE is the section on performance measurement) because it is in the syllabus and has been asked in the exam.

Our free lectures cover everything needed to be able to pass Paper F9 well (including calculating the ARR !!). If you are watching the lectures then you do not need a Study Text. What you do need is a Revision Kit form one of the ACCA approved publishers, because practice at exam-standard questions is vital to passing the exam.

Dear John,

Here is another question. X plans to get a holiday home in 5years time for cash. D cost will be $1.5m. He plans to set aside the same amount of fund each yr for 5years starting immediately earning a rate of 10% interest per annum compound. How much does he set aside each year?
Please John, why did they do this:
1. They used 0-4yrs
2. They used annuity rate for 3yrs and added 1(1+3.170).

Thank you

You must start a new thread when you are asking about a different topic.

The annuity factor is the total factor for flows that start in 1 years time.

Since the first payment is immediate then the PV of this flow is the same as the flow and needs adding on to the annuity factor for the flows from time 1 onwards.