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1 and 3 only right? because external finance should not necessarily be paid back that quickly we just need evidence ?!
I dont remember doing a type of question like the one that came up in Section C, regarding Porject Z NPV. It was all cash outflows. There was a savings involved but I got a negative NPV. Dont know if it is right or wrong but i wasted a lot of time on it.
Was it because there were no dividends paid for the last two years? if so why was the cost of equity deducted?
Hello Yasemin, I am not the tutor I am sorry to both Yasemin and the tutor for replying and I hope I don’t get pinched on the ear by the tutor for answering in the forum but I got the answer and I hope I can make it clear.
You understood the profit right? -that is 9m(the price that the seller sold)-5.4m(cost incurred of 4m and extra 1.4m)=3.6m.
This is the total profit the seller expects which can only be realised if the buyer in the same group sells it to an outside party .
In the question it says that 1.5m was unsold by Polestar, thereby the profit on this much inventory was not realised
So the profit on unsold goods= 3.6m*( 1.5m / 9m ) = 600,000
Hope you remember ,when we do group SPL or Group Retained earnings, we allocate at the end , the profit/post acquisition retained earnings of the subsidiary to the Group and to the NCI at their respective % holding.
So in the same way we allocate this individual item of PURP which appears in the SPL to NCI at their share
i.e 600,000*25%= 150,000
The question was to find how much was attributable to NCI , 150,000 was attributable to NCI
I think I got the solution to the problem .Do correct me if I am wrong but what they did was they cancelled the effect of the intra company transfer of asset and the extra depreciation that arose out of it
Thanks
You are the reason I passed PM first attempt so I always listen to the lectures first thing before I read the texts sir, the reason I got this doubt was I jumbled this formula re= Do(1+g)/Po +g instead of the Po one and I got a different answer. That’s why I get confused. I will do the Po formula from now on sir
I don’t know Sir, in some similar questions they include the investment and in other questions like this they already include the investments in the total figure. There is no proper giveaway .Thanks for your help anyway Sir
I’m sorry sir but didn’t want to sound rude I saw you replied to every doubt except mine and I don’t have anyone else to ask
Thank you for everything and I genuinely apologizeSIR JOHN!!you haven’t yet responded to my question but replied to everyone else please clear my doubt too. I wouldn’t ask if I didn’t need your help sir come on!
This is the relevant part of the question..
The company has a cost of capital of 10%.
The budgeted operating statement for the month of July is shown below:
B C
$’000 $’000
Sales revenue 1,300 1,500
Less variable costs (700) (800)
Contribution 600 700
Less controllable fixed costs (134) (228)
Controllable profit 466 472
Less apportionment of head office costs (155) (180)
Net profit 311 292
Divisional net assets $23.2m $22.6mDivision B has now been offered an immediate opportunity to invest in new machinery at a cost of $2.12 million.
The machinery is expected to have a useful economic life of four years, after which it could be sold for $200,000.
Division B’s policy is to depreciate all of its machinery on a straight-line basis over the life of the asset. The
machinery would be expected to expand Division B’s production capacity, resulting in an 8.5% increase in
contribution per month.Recalculate ROI and RI..
