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Kaplan Revision Kit Q5 PartSea

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Kaplan Revision Kit Q5 PartSea

  • This topic has 1 reply, 2 voices, and was last updated 6 years ago by John Moffat.
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  • Author
    Posts
  • September 26, 2018 at 7:21 pm #475802
    ishmero2006
    Participant
    • Topics: 9
    • Replies: 5
    • ☆

    I want to to know what the relevant cost would be, for at least yr 2 ,for an investment appraisal in the following aspect of the question:

    In a foreign direct investment strategy a UK company,Partsea,will have to import components from another of Partsea’s subsidiaries in Bottoniland to the target country of Hotternia,from year 2 onwards at a fixed price of 5 Bottoniland tala(Bt) per unit. 25% of this price represents profit element to the Bottoniland company. Sales units will be 1m units in yr 1 but 2.5m units per year for the remainder of the planning horizon.
    Inflation Exchange Rates
    Yr UK Hotternia Bottoniland $H/E Bt/E $H/Bt
    spot 15.8 4.2 3.76
    1 2% 10% 5% 17.04 4.32 3.94
    2 3% 8% 5% 17.87 4.41 4.05

    September 27, 2018 at 9:14 am #475849
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54679
    • ☆☆☆☆☆

    But you have an answer in your Revision Kit and the cash flow at time 2 is 51M $H !!

    If you are asking how this was calculated, then there are 2.5M units at a fixed price of 5 Bt and the exchange rate is 4.05 $H/Bt

    2.5M x 5 x 4.05 = 50.625M $H

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