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A company undertakes a project that involves purchasing machinery at a cost of $65000. The machinery is used on the project for 5 years, generating operating cash inflows of $20000 per year. It is sold at the end of the project for $10000. Taxation is charged at a rate of 30%.
Calculate the initial ROCE for the project.
In the Kaplan exam kit they have used 4 years to depreciate the asset. Why?
I do not have the Kaplan Kit, only the BPP Revision Kit, and without seeing the full question I cannot properly explain.
From what you have typed, it does seem as though maybe there is an error in either the question or the answer if they are calculating the ROCE (and not the NPV).