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BPP Practice and Revision Kit. Question 113 and 118.

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › BPP Practice and Revision Kit. Question 113 and 118.

  • This topic has 3 replies, 2 voices, and was last updated 9 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • June 27, 2016 at 9:36 am #324209
    acca9
    Member
    • Topics: 68
    • Replies: 50
    • ☆☆

    Would it be possible to explain these two answers? Ive watched the lectures but for some reason im still getting stuck
    Many thanks

    June 27, 2016 at 5:07 pm #324251
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    I think we must be using different editions of the Revision Kit.
    I have no 113 or 118 (although I do have a 11.3 and 11.8).

    June 28, 2016 at 6:55 am #324292
    acca9
    Member
    • Topics: 68
    • Replies: 50
    • ☆☆

    Im using the latest edition of the exam kit if that helps….

    Question 113:

    Juicy Co is considering investing in a new industrial Juicer for use on a new contract. It will cost $150, 000 and will last 2 years. Juicy Co pays corporation tax at 30% (as the cash flows occur) and, due to the health benefits of juicing the machine attracts 100%tax allowable depreciation immediately.

    Given a cost of capital of 10% what is the minimum value of the pre-tax contract revenue receivable in 2 years which would be required to recover the net cost of the juicer?

    A $150, 000
    B $105, 000
    C $127, 050
    D $181, 500

    Question 118:

    A project has the following cash flows:
    T0 Outflow $110, 000
    T1-T4 Inflow $40, 000

    At the companys cost of capital of 10% the NPV of the project is $16800

    Applying sensitivity analysis to the cost of capital, what percentage change in the cost of capital would cause the project NPV to fall to zero?

    A 70%
    B 17%
    C 5%
    D 41%

    Thanks for all your help!

    June 28, 2016 at 5:21 pm #324329
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    I have found the questions, but I really do not understand what you want from me!

    The Revision Kit gives the answers and the workings for them, so you are going to have to say which bit of the workings you do not understand.

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