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Hi,
I need some help with understanding the below:Old oven has an NBV of 2000
The replacement oven will cost 75000Total costs including maintenance and depreciation is 25000 where depreciation is 20% straight line
The new oven is estimated to generate 60000 per annum before these costs
How is the ROI 60%? A breakdown of the answer showed (60000-15000)/75000, but I’m unsure where the 15000 comes from
I would assume that the 15,000 is the depreciation on the oven (20% x 75,000).
However I do not know why they have ignored the maintenance costs (I can only guess that they are assuming that they will stay the same whether or not they buy the new oven).
However I would really need to see the whole question but I do not have the BPP Study Text, only the Revision Kit.
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