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- April 17, 2024 at 6:21 pm #704230
Anyone knows at what % is WR1
February 29, 2024 at 4:21 pm #701483thank you sir.
February 19, 2024 at 8:46 am #700662Also sir when we calculate life cycle cost
We include only the life cycle’s worth of depreciation
Like asset life 40 years while the product life is 15 years….we only include in the product life cycle the 15 years worth depreciation right?February 19, 2024 at 8:05 am #700656Also sir when calculating LIFE CYCLE COST
Do we include the ABSORBED/APPORTIONED OVERHEADS?January 20, 2024 at 8:53 am #698683but sir how the incremental fixed cost will be taken into account, since c/s ratio also does not include incremental fixed cost? please explain
January 20, 2024 at 6:49 am #698678sir i understood the situation when the total fixed cost remain unchanged in short term, but when incremental fixed cost is given for the products i.e. fixed cost will only be incurred when the specific product is manufactured ,….in this situation, the limiting factor analysis of maximizing contribution won’t work…. as the total fixed cost is not constant whatever the product mix, since the incremental fixed cost will only occur if the specific product is made.
in this situtation what will we do to identify the order in which the goods are made.January 19, 2024 at 3:44 am #698625also sir there is one more problem….
the ranking when make vs buy with a limiting factor is based on SAVING=EXTERNAL PURCHASE COST-VARIABLE COST TO MAKE. THIS GIVES THE CHEAPEST OPTION TO PRODUCE/BUY DECISION.BUT THERE IS A PARTICULAR SCENARIO.
PRODUCT X Y Z
UNITS REQUIRED 2000 3000 4000
VARIABLE COST TO MAKE $12 $9 $10
ATTRIBUTABLE FIXED COST $11000 $6000 $6500EXTERNAL PURCHASE COST $18 $12 $12
SAVING(PURCHASE PRICE- $6 $3 $2
VARIABLE COST)
RANK 1 2 3ONLY 8000 UNITS CAPACITY IS THERE
SO TOTAL COST = (2000*12+11000)+(3000*9+6000)+(4000*12)=$116000
NOTE: ALL OF Z ARE EXTERNALLY PURCHASED SINCE USING 3000 AVAILABLE CAPACITY FOR Z WILL GIVE A HIGHER COST DUE TO SPECIFIC FIXED COST.
BUT SIR FOR INSTANCE IF WE DO NOT FOLLOW THE RANKING AND GO MAKING IN ORDER OF Z,Y,X THEN TOTAL COST COME:
(4000*10+6500)+(3000*9+6000)+(2000*18)=$115500
AGAIN ALL OF X SHOULD PURCHASED SINCE ONLY MAKING 1000 UNITS WILL HAVE INCURRED FIXED COST MAKING IT EXPENSIVE.BASED ON THIS COMPARISION IT SEEMS THAT RANKING FALLS WRONG….SO I GUESS THERE IS SOME MORE TO RANKING(ESPECIALLY WHEN THERE IS SPECIFIC FIXED COST.)
January 19, 2024 at 2:43 am #698622So sir it means it is better to check by total cost method and do not just rely on ranking when there is fixed cost
January 17, 2024 at 3:54 pm #698519SINCE IN SHORT RUN EVEN IF THE FIXED COST ARE SPECIFIC FOR A PRODUCT, THEY WILL REMAIN UNCHANGED BY PRODUCTION OF ANY NUMBER OF UNITS, AND HENCE OUR AIM SHOULD BE TO MAXIMIZE CONTRIBUTION.
January 8, 2024 at 6:20 pm #697839ok so since we cannot assume fixed cost that’s why they have considered it variable and hence the note 2.
January 6, 2024 at 4:44 pm #697778Relevant cost of existing use means for example if there is labour to be used in both project but will have to be diverted from other department….we will use as cost the opportunity lost of labour ….right???
January 6, 2024 at 4:42 pm #697777So it means that if there are two new projects available we would just compare them
And for each project we will use the opportunity cost of their EXISTING USE as opportunity cost rather than opportunity cost of other new project in
RightJanuary 3, 2024 at 10:38 am #697643but sir my tutor stated that when two new projects are there they are simply compared and no worry of opportunity cost
and also john moffat stated the same in his previous post that opportunity cost is only required when the existing income is at stake?January 3, 2024 at 6:02 am #697631sir let me clarify my doubt…
for example there are two NEW PROJECTS(one of them is one off contract)…..and resource are scarce so i can take only one of the two….
now for one off contract the question asks me to decide the minimum price…..
for the minimum price will i have to include opportunity cost of the lost contribution of the other project ?January 3, 2024 at 3:15 am #697627But sir opportunity cost is the best alternative foregone due to scarce resource…..
Here the project b will be foregone due to scarcity …..then why not opportunity cost of accepting project aDecember 21, 2023 at 8:10 am #697151Sir so if there are two contraints linear programming will be used?
December 5, 2023 at 2:26 pm #696160got it sir
kindly just confirm the below understanding of mine
primary money market
forward exchange contract(cannot be traded)
otc options
forward rate agreementsecondary money market
currency futures
exchange traded optionsDecember 5, 2023 at 1:52 pm #696156So a currency future will be secondary market right??
November 27, 2023 at 2:06 pm #695615Ok sir i guess i have now understood
I just want to confirm one last thing
There is no such logic that if SECTOR AVERAGE P/E RATIO IS GIVEN THEN USE CURRENT EARNINGS AND IF A SINGLE SIMILIAR COMPANY ‘S P/E RATIO IS GIVEN THEN USE FORECAST EARNINGS….right??
It’s just that the exam will state whether to use forecast or current earningsNovember 27, 2023 at 11:35 am #695604Sir but in gww co they said forecast earnings is acceptable
The way they used in pike co the forecast earnings by using the expected growth
However the study hub denies the use of expected growth
Tanglefoot Co is an unlisted company. Its most recent earnings per share (EPS) was $0.53 per share and next year’s EPS is forecast to be 10% higher. Tanglefoot Co has $50,000 of issued share capital ($0.10 nominal value per share). The average price-earnings ratio of listed firms in the same business sector is 12 times.Required:
Estimate the total value of Tanglefoot Co using the price/earnings ratio method.
In this question they didn’t grow the earnings by 10% ….they just used the current earnings
It is a question from study hubNovember 26, 2023 at 12:03 pm #695528But sir that 80% or 5000 will be realisable value rather than cost of replacing them
November 26, 2023 at 4:37 am #695514sir i just wanted to know that when we use the replacement value for calculating the value of company, do take into account the realizable value, like the information that the trade receivables are only 80% realizable or inventory have only scrap proceeds of $5000, or not?…and if we take please explain why
November 23, 2023 at 10:19 am #695307A company has 5% loan notes in issue which are redeemable at their nominal value of $100 per loan note in eight years’ time. Alternatively, each loan note is convertible after seven years into 11 ordinary shares. The company’s ordinary shares are currently trading at $6.50 per share and this is expected to increase by 6% per year. The current market value of the loan notes is $88.70 per loan note. The corporate tax rate is 30%.
Required:
Calculate the cost to the company of the convertible loan notes.
Like in this question the cost of debt is asked….and the conversion and redemption are in different time period…how will we compare the conversion and redemption option?November 16, 2023 at 12:25 pm #694959okay sir i will do as you say.
sir there was a question which i answered wrong so i just want to clarify two things.
the question was whether the purchase of OTC derivative by a firm is primary money market or secondary money market?
i thought the answer would be secondary but it actually was primary
SO in basic if we purchase any OTC contract like forward contract or otc option it will be a primary money market
and on the other hand any currency futures or exchange traded options will be secondary money market…right sir?November 16, 2023 at 8:31 am #694946But sir i just wanted to understand why the question applied interest rate parity and not the general rule here
And also the interest rate parity is for forward rate and the question didn’t state anything about forward rate - AuthorPosts