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Div for the first two years:
Yr 1 = 20cYr 2 = 20c * 1.04 so is 20.8c
PV Y1= 20c / (1 + 0.15)^1
= 20c / 1.15
= 17.39cY2 = 20.8c / (1 + 0.15)^2
= 20.8c / 1.3225 = 15.71cPV of constant dividend of 40c starting from Year 3:
Perpetuity formula
= 40c / 0.15
= 266.67c (This is the value at Year 2)Now, we need to discount this back to present value:
= 266.67c / 1.3225
= 201.01cPV value per share
= 17.39c + 15.71c + 201.01c = 234.11c
Life cycle costing evaluates all costs associated with a product throughout its entire life cycle, from development to disposal.
So we can simplify the analysis, for products with an even weighting of costs over their life, being distributed evenly, it becomes easier to predict and manage the total expenses associated with the product.
But, even if costs are not evenly spread, life cycle costing can still provide valuable insights into the total cost implications and profitability of a product.It says it above…
In part c states that tailors are ready to offer 500 hours of extra work if they are paid $4.50 instead of $1. The shadow price is $4.However, hiring the labourers for an extra 500 hours of work will lead to an idle time of 200 hours since tailor time will no longer be a constraint.
Watch our video on linear programming please
Market Value per Share = 3.72
Earnings per Share = 0.60Share Price / Earnings Per Share
3.72/0.60 = 6.2
Therefore, I think the PE ratio is 6.2.
If customers take 4 months credit instead of 3 months, and you offer a 4% discount for payment within 1 month, the effective rate can be calculated as you have done.
This calculation remains valid regardless of the change in the credit period, as it is based on the discount offered and the amount after the discount.However, to annualise this rate, you would typically consider the time period over which the discount is offered. If you want to annualise it, you would need to consider how many times this discount could be applied in a year.
In the context of a money market hedge for an import payment, the confusion regarding the spot rate arises from the nature of the transaction and the direction of the currency exchange.
In this scenario, the US company needs to pay €3.5 million in three months. To hedge this payment, the company needs to determine how much USD it needs to set aside today to cover this future payment.
So you use the higher rate of $2.00 per €1 because this is the rate at which the company would need to convert euros back into dollars when it receives the euros from its deposit in three months.
Thus a money market hedge, where the focus is on ensuring that the future payment can be met without exposure to exchange rate fluctuations.What are you asking…and why?
The shadow price can be calculated for any limited resource, and if both products are constrained by the same resource, yes, you would analyse the impact of that limitation on the overall contribution.No there are no expected changes to the FM syllabus.
On the ACCA website syllabus guide is says:ACCA periodically reviews its qualification syllabuses so that they fully meet the needs of
stakeholders such as employers, students, regulatory and advisory bodies and learning
providers.
There have been no additions to, or deletions from, the syllabusYes little or no inventory being held is indeed an assumption in the theory of constraints.
This assumption aligns with just-in-time, where the goal is to minimise inventory levels. In the context of limiting factor decision questions, emphasising the importance of managing resources.
The notes are fine to use for now… I will come back to you with any updates
It does appear that they have included the sunk cost of $20,000 for the lawyer while excluding the relevant opportunity cost of $800,000.
This could indicate a mistake in their calculation, as sunk costs should not be included in the profit calculation, and relevant opportunity costs should be considered.The idea is that you are trying to find the % that gives you a zero (npv)
Choose 10% as your first guess and then either 5% or 15% as the second, depending on whether the NPV at 10% was positive or negative.
For Section C questions there is no need to make two guesses anyway. It is more sensible to use the IRR function in the spreadsheet that is provided.
It is essential that you attempt the practice CBE exams on the ACCA website and that you make sure you know what functions are available and how to use them.Links to all of the resources about this on the ACCA website are in the last chapter of our free lecture notes.
The solution deducts the depreciation of the new asset from the capital employed figure to reflect the current value of the asset after accounting for its depreciation. The old assets, while they do depreciate, are not explicitly deducted in this calculation because the focus is on the new asset’s impact on the capital employed at the start of the year.
Generally, when calculating capital employed, it is common practice to adjust for accumulated depreciation to reflect the true value of the assets. However, if the question does not specify adjustments for economic depreciation or accumulated depreciation for old assets, it may be assumed that the accounting depreciation is already factored into the profit figure, and thus no further adjustment is necessary for the capital employed.
Because it says
The vehicle could be purchased for $34,000 using a bank loan with an after-tax cost of borrowing of 4% per year. The vehicle would have a useful life of four years and would have a residual value of $14,000 at the end of that period. Straight-line tax-allowable depreciation is available on the vehicle.
So ((cost – scrap value)/useful life) * tax rate34000-14000/4x 0.2
So use relevant costs when evaluating the overall decision and include fixed costs if they are avoidable. Use variable costs only when dealing with limited resources to assess the marginal cost of production.
1. Relevant Costs: These are costs that will be directly affected by the decision at hand. When considering whether to manufacture in-house or buy from an external supplier, you should include all relevant costs, which can encompass both variable costs and avoidable fixed costs. This is particularly important when you are evaluating the total cost of production versus the cost of purchasing externally.
2. Variable Costs Only: In scenarios where there are scarce resources, such as limited labor or machine time, the focus shifts to variable costs. This is because the decision may hinge on the marginal cost of producing one more unit versus the cost of buying it. In such cases, you compare only the variable costs of making the product in-house against the external purchase price to determine the most cost-effective option.
In the Robber Co example, part A included all relevant costs because it was assessing the overall cost of manufacturing versus buying. In part B, where labour was a scarce resource, the analysis focused solely on variable costs to determine which products to prioritise for in-house production versus outsourcing.
We can’t say for sure unfortunately……
The exam structure indicates that Section C will primarily focus on working capital management, investment appraisal, and business finance & WACC.While these areas are emphasised, it is important to note that other topics, including sources of finance, can also appear in Section C questions, but they will not be substantial parts of the questions.
To effectively prepare, consider focusing on the key concepts and techniques within these areas, while also reviewing the essential knowledge related to sources of finance. Not leaving it!
Utilising rotational learning can help reinforce your understanding, but ensure you allocate time to revisit all topics periodically to retain the information.
Ultimately, while you may have preferences for certain topics, being well-rounded in your preparation will enhance your confidence and readiness for the exam.
Best of luck!Order 300
Expected Profit = 0.2 * 150 + 0.3 * 150 + 0.3 * 150 + 0.1 * 150 + 0.1 * 150 =150
Order 400
Expected Profit = 0.2 * -850 + 0.3 * 200 + 0.3 * 200 + 0.1 * 200 + 0.1 * 200 = -20=?10
Order 450
Expected Profit = 0.2 * -975 + 0.3 * 75 + 0.3 * 225 + 0.1 * 225 + 0.1 * 225 = -195 + 22.5 + 67.5 + 22.5 + 22.5 = -60
Order 500
Expected Profit = 0.2 * -1100 + 0.3 * -50 + 0.3 * 250 + 0.1 * 250 + 0.1 * 250 = -220 + -15 + 75 + 25 + 25 = -135The answer is a 300
