Specific Investment Decisions

Explicit INVESTMENT DECISIONSQ1. On the off chance that an organization rents as opposed to purchase an advantage, which of the accompanying won't be an advantage to the buyer? (MCQ)Avoiding Tax exhaustionExploiting a minimal effort of capital Attract rent clients Potential future scrap(2 marks) Q2. Willow Co has just chosen to acknowledge an undertaking and is currently thinking about how to back the task. The advantage could be rented more than three years at a rental of $23,000 per annum, payable toward the beginning of every year. Expense is payable at 25%, one year falling behind financially. The post-charge cost of getting is 8%. Figure the net present estimation of the renting choice. (FIB)Years Cash streams ($)0 †2 Rentals (23,000)2 †4 Tax alleviation 5,75041084542545000NOTE: Negative answer ought to be given with a negative indication (- )$(2 marks) Q3. Select the right Lease alternative dependent on the announcements given. (HA)It is a tenant contract OPERATING FINANCEMaintenance and Servicing cost of Lessee OPERATING FINANCEAgreement for the valuable existence of the benefit OPERATING FINANCEIncluded in a critical position sheet of the Lessor OPERATING FINANCE(2 marks) Q4. Tango Co. necessities to choose about a benefit that will be utilized in a task. The organization has a choice to either Buy the advantage or Lease it. In the event that Tango Co. selects Buy choice the accompanying data is given: The benefit is purchased utilizing a bank advance for $400,000 for a timeframe of three years. The piece estimation of the advantage is $30,000 and yearly support cost will be $12,000 per annum. Compute the current incentive for year two utilizing a cost of obtaining of 5% (overlooking tax assessment)? (MCQ)$30,000$(11,424)$(10,884)$15,552(2 marks) Q5. What are the significant incomes for Buy alternative? (MRQ)Investment and Disposal proceedsRepair and Maintenance costTax admissible depreciationTax saving money on Servicing cost(2 marks) Q6. Beamer Co. needs to supplant a Dyeing machine on 31st December 2017. The machine is relied upon to cost $360,000 whenever bought promptly, payable on 31st December 2017. Following four years organization expects mechanical changes in the market making this machine repetitive and leaving a piece estimation of $20,000 on 31st December 2021. Capital stipend on 25% diminishing parity premise. An entire year recompense is given for procurement however no recording stipend in the time of removal. In the event that the upkeep cost is $15,000 every year payable at every year end and duty rate is 30%.What will be the Balancing Charge/Allowance? (MCQ)$28,172 Balancing Charge$27,000 Balancing Allowance$11,391 Balancing Charge$28,172 Balancing Allowance(2 marks) Q7. Putin Co has chosen to put resources into another machine which has a ten-year life and no removal continues. The machine can either be bought now for $55,000, or it very well may be rented for a long time with rent rental installments of $10,000 per annum payable toward the finish of every year. The expense of cash-flow to be applied is 11% and tax collection ought to be disregarded. What ought to be finished? (MCQ)Purchase the machineLease the machineSale or LeasebackDo nothing(2 marks) Q8. A machine is rented utilizing working lease and the yearly rent rental for a long time will be $67,000 payable at every year-end. The principal rental will be payable toward the beginning of year one. Figure net present worth utilizing a cost of capital of 13%? (Lie) 3816353683000$(2 imprints) Q9. A machine is rented utilizing account rent and the yearly rent rental for a long time will be $95,000 payable at every year-end. The primary rental will be payable at end of year zero ahead of time. The support cost is $10,000 per annum for a long time. Figure net income for year two utilizing charge spare pace of 30% chronicle in the year income emerges? (MCQ)$(66,500)$(73,500)$(7,000)$28,500(2 marks) Q10. â€Å"Assets with inconsistent lives can't be contrasted with an examination won't resemble with like†. Which of the accompanying alternative identifies with the above articulation? (MCQ)Equivalent yearly costProfitability indexAsset Replacement decisionProbability examination (2 imprints) Q11. Venture A with a NPV of $4m with six-year term. Venture B with a NPV of $5m with seven-year term. Task C with NPV of $6m with a three-year length. Cost of capital is 12%. Which of the accompanying will be positioned second? (MCQ)Project AProject BProject CNone of the above(2 marks) Q12. The net present estimation of the expenses of working a machine for the following three years is $10,437 at an expense of capital of 16%. What is the proportionate yearly cost of working the machine? (FIB)4114806477000$ (2 imprints) Q13. KD Co. is choosing to supplant payload planes each year or at regular intervals. The underlying expense of the plane is $200,000. The upkeep charges are as per the following: First year it's Nil ; $25,000 toward the finish of the subsequent year. The recycled worth would tumble from $110,000 to $90,000 on the off chance that it hung on the plane for a long time rather than a one year. KD Co. cost of capital is 4%. How frequently ought to KD Co. supplant their load planes % what will be the comparable yearly cost of the choice they pick? (MCQ)Replace each 1 year $(94,180)Replace each 1 year $(97,900)Replace at regular intervals $(139,875)Replace at regular intervals $(48,450)(2 marks) Q14. Which of the accompanying explanations is/are a constraint for Asset Replacement Decision? (MRQ)Replacement made each time is better than the past assetAssets supplanted have same money inflows each yearAssumed that Machines supplanted have unexpected operational efficiencies in comparison to the past assetIt overlooks natural damage(2 marks) Q15. Capital Rationing is the limitation on associations capacity to put resources into all activities because of lacking assets. Select the applicable proclamations whether they are valid or bogus. (HA)Hard Capital Rationing is the breaking point on the measure of money accessible forced by the loaning organizations TRUE FALSESoft Capital Rationing is the cutoff on the measure of account accessible forced by the loaning foundations TRUE FALSEProfitability record is an answer appropriate to separable undertakings just TRUE FALSETrial ; Error technique is the arrangement material to detachable ventures just TRUE FALSE(2 marks) Q16. Question Co. is evaluating three venture extends yet is encountering a capital proportioning in Year 0. No capital apportioning is normal in future, yet all the tasks are significant for the organization and can't be deferred ; a choice should be taken. Conundrum Co. cost of capital is 6%. Which request should the activities to be positioned? The accompanying data is accessible: (MCQ)Project The expense in year 0 ($) Present Value ($) Net Present Value ($)Jeremy 115,000 121,900 12,190James 43,000 45,580 13,674Richard 75,000 79,500 47,700Jeremy, Richard, JamesJames, Jeremy, RichardRichard, James, JeremyJeremy, James, Richard (2 imprints) Q17. What is an indissoluble project?It is the proportion of the NPV of a task to its venture costIt is the task that must be embraced totally or not at allIt is the venture that must be attempted totally or partiallyIt is the undertaking limitation because of deficient funds(2 marks)The following data identifies with Q18 ; Q19.Schneider Co. is confronting a capital limitation of $150m promptly accessible for venture. The interests in potential tasks are: Project Initial Cost ($m) NPV ($m)W 30 7X 70 12Y 60 12Z 40 16 Q18. On the off chance that the activities are separable, what is the NPV produced from the ideal venture program? (FIB)35115524765 00 $ Million(2 imprints) Q19. In the event that the tasks are indissoluble, what is the NPV created from the ideal venture program? (MCQ)$19m$24m$28m$35m(2 marks) Q20. Spot the figuring steps of Profitability list in the right request. (P;D)Monitor the speculation made in the undertaking 1Calculate gainfulness file of each task 2Allocate the assets 3Rank the venture 4(2 marks)SPECIFICINVESTMENT DECISIONS (ANSWERS)Q1. AAvoiding charge weariness is an advantage for resident instead of the buyer. Expense fatigue is the point at which a business has negative available pay so can't profit by charge saving.Exploiting an ease of capital is an advantage for the purchaserAttracting lease clients is an advantage to a lessorPotential future piece is an advantage for the buyer as the renter isn't qualified for future piece continues Q2. $-50,289Years Cash streams ($) Discount Factor (8%) Present worth ($)0 †2 Rentals (23,000) 1 + 1.783 (64,009)2 †4 Tax alleviation 5,750 3.312 †0.926 13,720NPV (50,289) Q3. CIt is a tenant contract OPERATING Maintenance ; Servicing cost of Lessee FINANCEAgreement for the helpful existence of the advantage FINANCEIncluded in a critical position sheet of the Lessor OPERATING Q4. Year 0 1 2 3Investment/Scrap esteem (400,000) 30,000Maintenance (12,000) (12,000) (12,000)Net Cash stream (400,000) (12,000) (12,000) 18,000DF 5% 1 0.952 0.907 0.864Present worth (400,000) (11,424) (10,884) 15,552 Q5. All incomes are significant for Buy choice Q6. DYear 2017 2018 2019 2020 2021 2022Investment/Scrap esteem (360,000) 20,000 Tax spare 27,000 20.250 15,188 11,391 28,172Workings:2017 (360,000 Ãâ€"25%) = 90,000 Ãâ€"30% = 27,0002018 (90,000 Ãâ€"0.75) = 67,500 Ãâ€"30% = 20,2502019 (67,500 Ãâ€"0.75) = 50,625 Ãâ€"30% = 15,1882020 (50,625 Ãâ€"0.75) = 37,969 Ãâ€"30% = 11,391Balancing Allowance (113,906 †20,000) = $ 28,172 Q7. APresent benefit of renting costs PV = Annuity factor at 11% for a long time Ãâ€"$10,000 = 5.889 Ãâ€"$10,000 = $58,890 If the machine was bought now, it would cost $55,000. The buy is along these lines the least-cost financing choice, thus picking the buy choice. Q8. $ †267,866$67,000 Ãâ€"3.998 (annuity factor for a long time) = $ †267,866 Q9. BYear 0 1 2 3Lease rentals (95,000) (95,000) (95,000) Maintenance (10,000) (10,000) (10,000)Tax spare 30% (LR) 28,500 (M) 3,000 3,000Net income (66,500) (73,500) (73,500) (7000) Q10. CEquivalent yearly expense is technique for changing over resource lives to resemble with likeProfitability list is the strategy to defeat capital rationingAsset Replacement choice is correctProbability investigation is strategy under hazard ; vulnerability Q11. BProj