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ROI Question (BPP pg 414)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › ROI Question (BPP pg 414)

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by John Moffat.
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  • Author
    Posts
  • November 10, 2021 at 10:13 pm #640393
    huzayfa95
    Member
    • Topics: 4
    • Replies: 2
    • ☆

    Hi,
    I need some help with understanding the below:

    Old oven has an NBV of 2000
    The replacement oven will cost 75000

    Total 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

    November 11, 2021 at 7:40 am #640407
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51538
    • ☆☆☆☆☆

    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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