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hello sir
if roi is 15% and the directors demand a minimum roce of 12% why does the company accept this project? i don’t know why to compare roi and roce
The company is currently required a return on capital of 12%.
If the new project gives a return on the investment needed of 15%, then accepting it will serve to increase the overall return on capital.
ROI and ROCE are both measuring the same thing. ROCE is measuring the overall profit as a % of the overall investment. ROI is measuring the the profit from the new project as a % of the amount invested in the new project.
Have you watched my free lectures on this? The lectures are a complete free course for Paper PM and cover everything needed to be able to pass the exam well.
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