Question
SECTION C Answer all question in this section, total marks = 20 marks Boroko Group Ltd is expanding its chain of retail stores in Gaborone
SECTION C Answer all question in this section, total marks = 20 marks Boroko Group Ltd is expanding its chain of retail stores in Gaborone through the purchase of Payless Store in Kagiso Mall at a cost of $350 000. A further cost of $150 000 is to be included to refurbish the property with new equipment for the store. Cash flows for the business are projected as below: Year Net Cash Flows ($) 1 70 000 2 70 000 3 80 000 4 100 000 5 100 000 6 120 000 Q P - A S R - 0 0 1 | R e v 0 0 1 E f f D a t e : 0 9 - 0 8 - 2 0 2 3 Page 4 of 4 The equipment will depreciate to zero over the period and Boroko Group is confident that the business could be sold for $350 000 after the sixth year. To establish the viability of the project, Boroko will use return on capital employed. Required: a) Calculate the projects return on capital employed (ROCE).(12 marks) b) Write a short report highlighting why the above method is inferior to NPV investment appraisal method
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