Arrow wants to buy a new item of equipment which will be used to provide a service
Question:
Arrow wants to buy a new item of equipment which will be used to provide a service to customers of the company. Two models of equipment are available, one with a slightly higher capacity and greater reliability than the other. The expected costs and profits of each item are as follows.
ROCE is measured as the average annual profit after depreciation, divided by the average net book value of the asset. You are required to decide which item of equipment should be selected, if any, if the company’s target ROCE is 30%. |
Financial Reporting Financial Statement Analysis and Valuation a strategic perspective
ISBN: 978-1337614689
9th edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw