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In the final year there is a balancing charge or balancing allowance of the difference between the sale proceeds and the tax written down value. If the two are the same then there is no allowance.
Do watch my free Paper FM lectures on investment appraisal with tax for a full explanation of this 🙂
It has been asked in the exam once (although from memory only once, and soon after this article was published).
It is not really something to learn, although it is worth working through it just to check that you understand where the figures are coming from.That is the strict definition of working capital.
However, why are you asking? The reason I ask is that although the management of working capital is an important topic for Paper FM, the management of it is not asked in Paper AFM. In Paper AFM the main relevance is in investment appraisal questions (and for these, the definition is of much less relevance).
Of course you can!!
Some of the lectures were indeed recorded several years ago, others were recorded more recently. We only record new lectures when there are syllabus changes. The majority of Paper FA topics in the syllabus remain the same every year.
All of our lectures are relevant for the current syllabus.
Your approach is strictly more correct and would get the marks 🙂
(Although do mention in words in your answer the fact that there is the residual exposure)For this particular question I cannot think of an alternative method.
It is fairly simple algebra (and I am afraid that Paper MA does expect you to be able to do algebra to this level).For me, the easiest way to solve it is to use some simple algebra.
The the variable cost is V per unit and the fixed cost if F, then:
at the 16,000 unit level, 16000 V + F = 135000
at the 22000 unit level, 22000V + F x(1.1) = 170000Multiply the first equation by 1.1, subtract one equation from the other, and you will have a value for V.
You should then find it easy to answer the question 🙂(Surely anyway you have an answer in the same book in which you found the question? 🙂 )
Yes – 2% a year on a straight line basis is the same as depreciating over 50 years (100% / 2% = 50)
But both are effectively the same because an overdraft is simply a negative cash balance.
Because fewer units are being ‘lost’ than were expected.
Have you watched my free lectures on this?
B is wrong because simply producing standards cannot ensure everyone performs ethically
C and D are wrong because individual countries cannot be forced to follow rules imposed by someone else.A is correct because although every country has the right to fix their own rules, the standards are to help (and encourage) them to adopt similar rules.
I cannot give you a schedule because I do not know what other commitments you might have.
You need to programme your days so as to have time to work through all of the chapters in our lecture notes (watching the lectures that go with them). It is important to finish them a week before your exam so that you can then spend time practicing exam standard questions.
Sorry, but we do not provide answers to test questions.
You must surely have been provided with an answer and if there is anything in the answer that you are not clear then ask and I will explain.
You have posted this in the Paper AFM forum. However it is too simple for AFM and is more Paper FM. Our Paper FM lectures cover in detail everything that is needed to be able to answer this question.
Increase in net assets = capital introduced + profit – drawings.
This is all explained Chapter 2 of our free lecture notes and in my free lectures working through Chapter 2.
As far as the calculation of the firms value is concerned it is the standard calculation of the PV of a growing perpetuity (which is the case here).
For the depreciation, although the depreciation itself is not a cash flow the question says that an amount equal to the depreciation is needed to maintain the current level of activity. This is very standard for the examiner these days and I do explain this in my free lectures.
I am not sure if I am looking at the same question as you. The only Paper AFM exam equation called Dricom is a very old question and was set in the December 1997 exam (not in 2010).
Thie question was a reorganisation and was not requiring a DCF appraisal – it was wanting to examine (and comment on) whether the reorganisation would satisfy the requirements of the various stakeholders.
The relevance of the tax is in order to calculate the profit after tax (i.e. the financial accounting profit after tax). We are not calculating the net cash flows because we are not required to calculate the present value and so adding back is not relevant.
We know that the bank statement is showing a balance of $200 Dr
However the cash account will be showing a different balance because of unpresented cheques, lodgments not yet credited, and any errors on the bank statement.
So what the question is asking for is what balance will be showing in the actual cash account, so you need to ‘work backwards’ from the bank statement to calculate this.
Hope that helps 🙂
I am afraid that it is wrong to simply multiply the std deviation by 5. It is the variance that must be multiplied by 5. (The reason becomes obvious by watching the Paper MA lectures on the standard deviation, but to be honest I would not waste your time but would just learn the rule)
I am afraid that it is wrong to simply multiply the std deviation by 5. It is the variance that must be multiplied by 5. (The reason becomes obvious by watching the Paper MA lectures on the standard deviation, but to be honest I would not waste your time but would just learn the rule)