Investment Appraisal

This topic has 1 reply, 2 voices, and was last updated 5 years ago by John Moffat.

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December 27, 2020 at 6:08 am #600934
adarsh1997
Participant
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Hello John,

There is a question in Kaplan Kit ( Armcliff co ) where we were required to calculate the ARR.
And in it’s the average investment has been calculated by adding the book values of the asset over its life of 4 years and then dividing by 4. Why initial investment + scrap value / 2 was not used?

Thanks
December 27, 2020 at 11:16 am #600955
John Moffat
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I do not have the Kaplan Exam Kit (only the BPP Revision Kit). However the average capital employed should be calculated as initial investment + scrap value / 2.
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