Q98 BPP REVISION KIT

Hello, I have a question on ROCE.

Based on my understanding, in order to find ROCE in investment appraisal, the formula is average profit/average investment. But, in this question the average profit is divided by only initial investment. May i know why?.

My calculation:
(3000-12000)/(9000/2) = 26.67%

The answer’s calculation:
(3000-1200)/9000 = 13.33%

The question:
A project has average estimated cash flows of $3,000 per year with an initial investment of $9,000.
Depreciation is straight-line with no residual value and the project has a five-year life span.
The company has a target return on capital employed (ROCE) of 15% and a target payback period of 2.5 years. ROCE is based on initial investment.

Under which investment appraisal method(S), using the company’s targets, will the project be accepted?

Thank you.