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@liamb said:
I think the 100% allowance in first year just means you just calc whatever the tax rate was of the investment (like 15% of £600k) and use that as a positive cash flow in year one – which made my NPV positiveAhhh ok, I did that so hopefully my answer was correct 🙂
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@tonim said:
I don’t understand why you would inflate the current year as Y1, the current price, are the prices that are actually being charged… inflation is an indication for future years, how much MIGHT be charged based on a future trend of increased prices.thats correct.
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@katie8223 said:
Inflating at T1 would be correct as far as I know. The figures they give are at today’s date so if it says £100 sales and 4% inflation T1 would be £100 + 4% then T2 would be £100 + 4% + 4% and so on.Yes looking at the ACCA text, T1 is inflated
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@nella28 said: Yr0 in NOW- not inflated. YR1 onward are future days .
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Anyone remember the question on reason why the directors use matching as a hedging technique:
1) directors don’t understand more complex hedging techniques
2) so investors can understand the hedging technique
3) so that the company reduces the amount of the fx trades and number of transactions
4) something else
I selected 3 anyone else know if this is correct?
R & D costs are already been spent (sunk) well they were not added as investment so no worries about that but their amortization was deducted to arrive the forcast profits/(losses),
So what i did is i added the amortization yearly ,and the depreciation on the original investment of 600000 was not adjusted so no need to add it back but they said that information for tax saving purposes which was just in the first year as they mentioned that 100% is initially charged so over all of this gave me a Positive NPV.Let me know what you think off this.
@snell123 said:
Would of given a slightly high cost of equity, but that’s not to say my answers was correctWhat did you get for the cash operating cycle ?the days
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@aliansari14 said:
What did you get for the cash operating cycle ?the daysI got 58 days
40 days receiveables
Less 30 days payable
Plus 48 days inventory daysInventory 2.4 multiplied by 1.2 (growth) = 2.88
Cost of sales 18.3 multiplied by 1.2 = 21.96
2.88/21.96 multiplied by 365 = 48
@snell123 said:
I got 58 days40 days receiveables
Less 30 days payable
Plus 48 days inventory daysInventory 2.4 multiplied by 1.2 (growth) = 2.88
Cost of sales 18.3 multiplied by 1.2 = 21.96
2.88/21.96 multiplied by 365 = 48
For the cash cycle didn’t they say they were reducing the recievables days to 10 days? Thats why I got 28. I could be wrong though coz most ppl seem to have got 58.
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@xanpech said:
For the cash cycle didn’t they say they were reducing the recievables days to 10 days? Thats why I got 28. I could be wrong though coz most ppl seem to have got 58.Think they said reducing by 10 days but I could be wrong
I got 58 days first then when I read over the question it asked for forecast figure not what was provided in statement of financial position given. So I would have adjusted the days by what was forecasted to achieve reduction of receivables by 10 days as well as payable and inventory to 30 as to meet their suppliers terms.
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@keaney said:
I got 58 days first then when I read over the question it asked for forecast figure not what was provided in statement of financial position given. So I would have adjusted the days by what was forecasted to achieve reduction of receivables by 10 days as well as payable and inventory to 30 as to meet their suppliers terms.Oh ok, what did you get then?
I am not sure how accurate it is. But what I believe and adjustment would have been required to get the answer i don’t think they would have made it so simple.
I got 76 days because they mentioned that inventory is kept to minimum which is the finished goods so for finished goods we use cost of sales but i didn’t do that because they mentioned that they buy the material from supplier and the inventory is mostly in W.IP don’t u think that we had to use the purchases they gave which we had to increase by 1.2.
as W.I.P inventory is calculated by W.I.P/cost of production,
And however you can’t make an assumption if purchases and cost of sales are given that they will both increase by the same percentage.@snell123 said:
I got 58 days40 days receiveables
Less 30 days payable
Plus 48 days inventory daysInventory 2.4 multiplied by 1.2 (growth) = 2.88
Cost of sales 18.3 multiplied by 1.2 = 21.96
2.88/21.96 multiplied by 365 = 48
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Anyone have the fx question where the offer was lower than the bid price – you had to calculate the 3 month forward rate using the the inflation rates.
Think offer was 10.5 and bid 12.25
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