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Like, when to use “eac approach” and when to Use “selecting the highest npv approach”?
I have another confusion. If, two projects are into consideration.
Project A has an NPV of 40,000 and is expected to last 4 years
Project B has an NPV of 15000 is expected to last 1 yearcoc is 10%
40,000 / 4 year discount factor at 10%
15,000 / 1 year discount factor at 10%Equivalent annual benefit A = 12620$
Equivalent annual benefit B = 16500$What will be our decision for considering the project?
> If both projects are mutually exclusive
> and if there is no such mutually exclusive information given.I was going through this article and then the question in my mind occurred.
I did watch your lecture, but in the example the rationing we did, had the outflow only once which was year 0 and all the following years were inflows.
also would like to notify you, there was no example on general inflation where there are 2 different inflation rates and we use a general inflation rate to arrive at real net cash flows from nominal. We can arrive at real cash flows from nominal, without using general inflation too like we did in example 6 but I didn’t know we can use general inflation as well to arrive until I struggled almost half hour on general inflation in a question on npv june attempt 2019.
And also it said: Fixed overheads of the company currently amount to $1,000,000. The management accountant has
decided that 20% of these should be absorbed into the new product.Shall we not do any calculations for the 20% for the new product?
Great! Thanks, John.
I would like to mention that there was another student in the comment box of the lecture who struggled with the same confusion with the data given and assumed 5% interest was per month on 150,000$.
Data in the notebook says: The company earns interest of 5% on their current account bank balance.
Should have been more clear : The company earns interest of 5% per annum on their current account bank balance.
Okay, I understand this now. We will always first look at current market situation to calculate operational variance. If the market is selling it at 10 and we sold it for 9, the 1 dollar difference is going to be adverse (operational) and doesnt matter even if our budget was to sell at 8 dollars.
And for the planning price variance questions I have attempted, the majority question showed that market had a lower selling price than budgeted and in this case the planning variance is adverse, and if the market had a higher selling price than budgeted, the difference is taken to favourable planning variance.
Am I correct?
I have attempted all questions on variances correctly but I just can’t understand this logic. What if we had budgeted of selling it at 10$, the market had figures of 8$ and we sold it at 9$?
Alright, I just figured it out. I wasn’t applying standard mix on actual usage.
@fahada40 i think that blank asked the cost gap, and the cost gap was zero, according to my calculations.
@delamanisp Exactly, what’s done is done. you can’t go back and change it.
@charla Yes that training staff question type question in Section C. I skipped it. although i attempted everything else. But for that question I needed at least 20 minutes to “think” like wth is happening in this question.
@faiza I tried calculating the answer to that aircraft question like 8 times but my answer did not match any 4 options. Exactly 8 times! lmao
Okay, I just figured it out.
Method one > Actual quanty for actual production x 0.15
Method two > Standard Qty for actual production x 0.15If we’re using method one > Usage variance (Operational) in KG will be multiplied by old standard price.
If we’re using method two > Usage variance(Operational) in KG will be multiplied by revised standard price.Correct sir?
Can you please also make a comment on how the Favourable results were different?
Yes, I’m following your lectures for f5. You’re a great teacher.
Thanks John.
Okay. I figured it out, that in question one it’s written as “Future cash flows” So we needed to deduct the avg depreciation. but in question 12 its “Future profits” meaning depreciation was already deducted.
Thanks again.
Yes, I would need the nominal value of each share to answer this, I just opened up my f3 notes and went through the basics which I had completely forgotten, got it now. Thanks.
Would this be 800000 shares (8% of the total) and 2.5$ each making it 2,000,000$ in total? 2000000/800000 = 2.5$ each preference share?
Hi,
because we made an under provision of tax in last year of 200$. And now we have closed our financial statements of the last year and that cannot be adjusted. So we will treat it as an expense for this year in our profit and loss account. Now we also made a provision of tax payable with 1500, if we again make an under provision for example of “300$” so this 300 will be transferred as an expense for the next year.
and for example that 200$ represented the “over provision” then our tax expense would have reduced to 1300, and also the payable would have been 1300?
please correct me if I am wrong.
