[adylgjeri]

Dear Diana
Thank you for reply. I really appreciated it .

Regard this certificate could you please give me any further information on how does it work.
So where do you find the materials.
I mean you pay lets say for both course materials and assessment for the Certificate which are available together for £235 or separately at a cost of £130 each, and then they send you the materials to study for the exam ?
Or is just that they give you access to the online handbook of International Standards on Auditing and Quality Control 2015? If its the latter there are I think other sources, even sources that provide materials with no charge at all, so why do we need to pay just only to access the online handbook which can be obtained from the IFAC website?!

So coming back to ask, which option have you considered for this exam so you have payed for both course materials and assessment or only for one of the both.

Thanks

[adylgjeri]

AAAAAAAAAAAAAAAAAAAAA 🙂

I Did the calculation up to 1mln/4=250.000 🙂
i forgot the 30% tax rate to multiply it with te figure above 🙂

Thats why i was wondering where did this come from 🙂

thanks thanks

for sure , you gone hear me again 🙂
hope i will not bother you

[adylgjeri]

SC Co is evaluating the purchase of a new machine to produce product P, which has a short product life-cycle due to rapidly changing technology. The machine is expected to cost $1 million. Production and sales of product P are forecast to be as follows
Year Production and sales (units/year)
1 35.000
2. 53.000
3. 75.000
4. 36.000
The selling price of product P (in current price terms) will be $20 per unit, while the variable cost of the product (in current price terms) will be $12 per unit. Selling price inflation is expected to be 4% per year and variable cost inflation is expected to be 5% per year. No increase in existing fixed costs is expected since SC Co has spare capacity in both space and labour terms.

Producing and selling product P will call for increased investment in working capital. Analysis of historical levels of working capital within SC Co indicates that at the start of each year, investment in working capital for product P will need to be 7% of sales revenue for that year.

SC Co pays tax of 30% per year in the year in which the taxable profit occurs. Liability to tax is reduced by capital allowances on machinery (tax-allowable depreciation), which SC Co can claim on a straight-line basis over the four-year life of the proposed investment. The new machine is expected to have no scrap value at the end of the four-year period.

SC Co uses a nominal (money terms) after-tax cost of capital of 12% for investment appraisal purposes.
Calculate the net present value

In the answer the WDA is given at a value of 75.000, which im not clear where it comes from

the answer is given below
Year

Year 0 1 2 3 4
$ $ $ $
Total contribution 287,0 445,2 645,8 317,3
Taxation -86,1 -133,6 -193,7 -95,3
WDA tax benefit 75,0 75,0 75,0 75,0
Initial investment -1,000
Working capital -50,96 -29,3 -37,9 59,2 59,0
–––––– –––––– ––––––– –––––– ––––––
Net cash flows (1,050.9) 246,6 348,8 586,2 356,2
Discount factor at 1.000,0 0.893 0.797 0.712 0.636
12% –––––––– –––––– ––––––– –––––– –––––––
Present value (1,050,9) 220,2 278,0 417,4 1,366,6

NPV =$ 91,154

[adylgjeri]

Yes
you are right

Thanks a lot
it was very helpful comunicating with you

Have a nice day
Ana

[adylgjeri]

When i say isnt there a rule tu use each of them , I mean that till now i have learned by the text that we can use as a DF, the required rate of return from the investitor for example, but in both examples 13,14, its not mention this information, thats why i get confused where did the examiner found the DF used

[adylgjeri]

Thank you sir for your answer

So , if i understood correctly, the DF , are just a guess?!
So, isn’t there a rule to use each of them?!

Beause i know how to calculate cost of debt, and therefore the IRR,
But , I just didnt understand where did the examiner found the 2 DF, used in the example

But , nevertheless, as you suggest , i will watxh your lecture, in order to be clear

Best Regards
Ana

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