Question 21 The following information relates to three possible capital expenditure projects. Because of capital rationing only one project can be accepted. Project: A B C . Initial cost R100 000 R115 000 R90 000 Expected life 5 years 5 years 4 years Scrap value R5 000 R7 500 R4 000 Cash-inflows R R R End year 1 40 000 50 000 27 500 2 35 000 35 000 32 500 3 32 500 25 000 47 500 4 30 000 25 000 50 000 5 27 500 25 000 The company estimates its cost of capital is 18%. Required: (a) Calculate the payback period for Project A. Question 22 You are contemplating leaving your full-time employment to concentrate your ability on the marketing of a new low-energy portable heater. You have spoken to a group of manufacturers of similar product, and you have produced the following data based upon the production of 1200 heaters in the six months to December 31, 2021. R R Unit selling price 160 Less: Direct materials 50 Direct labour 30 Fixed Overheads: Admin 4.00 Rent 7.50 Rates 2.50 Depreciation 1.00 95 Mark up 65 Your initial plan is to produce 200 units per month and to start selling in August 2021. The forecast of sales you have calculated is: August September October November December Unit 50 80 120 180 200 All sales will be made on 30 days credit. Machinery will cost you R24, 000. This you propose financing on hire purchase terms; deposit payable July 1, 2021, R2,400; followed by 24 monthly instalments of R1,000 each. Raw materials suppliers will deliver an equal amount of parts at the beginning of each month. They will allow you 60 days credit. Wages and administrative expenses will be paid in the month in which they are incurred. Rent and rates of the premises will be paid quarterly in advance commencing on July1, 2021. REQUIRED: Prepare cash budget for the 6 months to December 31, 2021 for presentation to your bank manager who you hope will be prepared to give you an overdraft facility to supplement the R20,000 you intend introducing into your business (a) Calculate the closing balance for December.
Question 21
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The following information relates to three possible capital expenditure projects. Because of capital rationing only one project can be accepted.
Project: A B C . Initial cost R100 000 R115 000 R90 000 Expected life 5 years 5 years 4 years Scrap value R5 000 R7 500 R4 000 End year 1 40 000 50 000 27 500 2 35 000 35 000 32 500 3 32 500 25 000 47 500 4 30 000 25 000 50 000 5 27 500 25 000
The company estimates its cost of capital is 18%. Required: (a) Calculate the payback period for Project A. |
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Question 22
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You are contemplating leaving your full-time employment to concentrate your ability on the marketing of a new low-energy portable heater. You have spoken to a group of manufacturers of similar product, and you have produced the following data based upon the production of 1200 heaters in the six months to December 31, 2021.
R R Unit selling price 160 Less: Direct materials 50 Direct labour 30 Fixed Overheads: Admin 4.00 Rent 7.50 Rates 2.50 Mark up 65
Your initial plan is to produce 200 units per month and to start selling in August 2021. The August September October November December Unit 50 80 120 180 200 All sales will be made on 30 days credit.
Machinery will cost you R24, 000. This you propose financing on hire purchase terms; deposit payable July 1, 2021, R2,400; followed by 24 monthly instalments of R1,000 each. Raw materials suppliers will deliver an equal amount of parts at the beginning of each month. They will allow you 60 days credit.
Wages and administrative expenses will be paid in the month in which they are incurred. Rent and rates of the premises will be paid quarterly in advance commencing on July1, 2021. REQUIRED: Prepare cash budget for the 6 months to December 31, 2021 for presentation to your bank manager who you hope will be prepared to give you an overdraft facility to supplement the R20,000 you intend introducing into your business (a) Calculate the closing balance for December. |
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