sir in june 2012 biscuits and cakes in part d)last line says that residual income of investment alone is negative that is (132000 – 212000)= 80000 how did they get these figures 132k and 212k?
The contribution increases by 8.5%, so a total of 8.5% x 600 x 12 = $612 p.a.
There is extra depreciation of $480 p.a.
So extra profit = 612 – 480 = 132.
The notional/imputed interest = 10% x $2120 = 212
Thank you sir 🙂
You are welcome 🙂
Hi Sir, I just have a quick question about the solution for question 5 in June 2012. In the solution for question 5-c, it mentioned that the cost of capital is lower than the target return on investment. Where can I get the figure for Target Return on Investment?
Also, in the question like this about RI – asking if they perform well, what should I compare to?
The second paragraph of the question says that the target TOI is 20%!
With regard to RI, there is not a target – it is increases they have done well, if it falls then they have not.
Have you watched my free lectures on this? The lectures are a complete free course for Paper F5 and cover everything needed to be able to pass the exam well.
That’s perfect. I got it now. Thank you John
That’s great 🙂
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