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RI – Apple Co BPP

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › RI – Apple Co BPP

  • This topic has 3 replies, 2 voices, and was last updated 1 year ago by LMR1006.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • December 2, 2023 at 3:39 am #695833
    jessicarawlinson
    Participant
    • Topics: 8
    • Replies: 2
    • ☆

    Hello Sir,

    Hope you are well. Apologies if this a silly question but I am struggling with the below:

    An investment centre in Apple co generate a profit of £24k. You have been given the following additional information about the investment centre:
    Working capital 20k
    Non- current assets at cost 230k
    Accumulated dep £170k
    Carrying value £60k

    For the 1st question, which was what is the ROI we used £80k for the capital employed (20K + 60k)
    Which I understand but then the next question which is related said:

    An investment in a non-current asset could be made which would result in a capital employed figure of £100k. The investment would result in a new profit figure of £35k for the division. If the investment is made, what would the RI be for the investment centre if cost of capital is 12%.

    I thought I had to add the £100k onto the previous £80k before working out the imputed interest but in the answer they used £100k only.

    Is it because they didn’t say “additional”, which would then mean the £100k is the new total capital employed? It is quite confusing because for the profit they said “new”, so it was obvious to use this figure.

    Thank you in advance.

    December 2, 2023 at 5:15 pm #695874
    LMR1006
    Keymaster
    • Topics: 4
    • Replies: 1516
    • ☆☆☆☆☆

    Which question number is this from the exam kit?

    December 3, 2023 at 1:02 am #695898
    jessicarawlinson
    Participant
    • Topics: 8
    • Replies: 2
    • ☆

    Hello sir, question 340 (following on from 339), page 118 in the BBP practice and revision kit

    December 3, 2023 at 8:21 am #695917
    LMR1006
    Keymaster
    • Topics: 4
    • Replies: 1516
    • ☆☆☆☆☆

    It is
    It’s an investment in a non current asset so it’s the profit from this investment and the CE from this investment that is relevant
    The question is usually clear
    It usually says before and after the investment
    Or without the investment and with the investment

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