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You are provided with the following information on three future projects. Project C () 20000 Initial Investment Year 1 Year 2 Year 3 Year 4
You are provided with the following information on three future projects. Project C () 20000 Initial Investment Year 1 Year 2 Year 3 Year 4 Year 5 Project A () Project B () 10000 15000 Net Cash Inflows 5000 5000 5000 5000 2000 5000 1000 10000 5000 10000 8000 4000 2000 Return on capital employed (ROCE) is an accounting ratio used in finance, valuation, and accounting, defined as: Earnings Before Interest & Tax (EBIT) ROCE = Capital Employed The target ROCE is provided as 12 percent and the assumption is that there is zero scrap value. Required: Calculate the ROCE on an average investment basis and decide which project should be undertaken
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