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Levels Tought:
Elementary,Middle School,High School,College,University,PHD
| Teaching Since: | May 2017 |
| Last Sign in: | 402 Weeks Ago, 3 Days Ago |
| Questions Answered: | 66690 |
| Tutorials Posted: | 66688 |
MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Example
Calculation of the return on capital employed
Carbon plc is considering the purchase of a new machine and has found two which meet its specification. Each machine has an expected life of five years. Machine 1 would generate annual cash flows (receipts less payments) of £210 000 and would cost £570 000. Its scrap value at the end of five years would be £70 000. Machine 2 would generate annual cash flows of £510 000 and would cost £1 616 000. The scrap value of this machine at the end of five years would be £301 000. Carbon plc uses the straight-line method of depreciation and has a target return on capital employed of 20 per cent. Calculate the return on capital employed for both Machine 1 and Machine 2 on an average investment basis and state which machine you would recommend, giving reasons
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