section b mock acca

A company is evaluating the viability of two capital investment projects, Project Y and Project Z

Project Y requires an investment of $120,000 in year 0 in a depreciating asset with an expected life of four years
and no residual value. The straight-line method of depreciation is used.

Expected effects of the investment in Project Y in years 1 to 4 are:

Year 1
($’000)

Incremental sales 140

Contribution 49

Incremental fixed overhead (excluding depreciation) 12

Year 2
($’000)

Incremental sales 160

Contribution 56

Incremental fixed overhead (excluding depreciation) 12

Year 3
($’000)

Incremental sales 180

Contribution 72

Incremental fixed overhead (excluding depreciation) 12

Year 4
($’000)

Incremental sales 200

Contribution 80

Incremental fixed overhead (excluding depreciation) 12

Incremental sales

Contribution

Incremental fixed overhead (excluding depreciation)

The share of general fixed overheads that would be apportioned to Project Y would be $36,000 in each year.

Project Z is forecast to result in incremental net cash inflows of $95,000 in each of the five years of project life. The
investment amount in year 0 is uncertain.

The cost of capital is 12% per annum for both projects.

All cash flows take place at year end apart from the initial investment which occurs immediately.

task 1

what is the relevant cash flow for year 1 and year 3?

sir, I don’t get how to solve it

and I don’t have an answer for this as this was sent by my friend and he also don’t have the answer

can you explain it to me