BPP Practice and Revision Kit. Question 113 and 118.

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!