Model Answer for School Assignment Subject: Advanced Business Calculations Page 1 of 6QUESTION 1 (a)Rate of interest = 1.75% ©) V1.035 = 1.073495 Rate of interest = 1.735% (clinterest on £6,000 = 1.735% X £5,000 = £86.75 (interest added = 4% x £10,000 = £400 © (Amount in account = £10,000 + £400 + (69'X'210,000) = £10,900 (iDAt start of third year = £10,900 + £10,900 (4%'+'5%) = £11,881 ‘At start of fourth year = £11,881 x (1 + 9%) = £12,950.29 (ii) Equivalent increase (compound) per annum = 9% Note for Question 1 Part (e): in the question, it states ‘additional amount equal to ‘5% of the amount in the account during the previous year’. ‘Therefore, For first year, the amount = 10000. For second year, the amount = 10900 Page 2 of 6Begin to answer your question in a new page. Same format. Please write ‘€2.00° QUESTION 2 - GompanyA [Company Company Number of shares 4000 [2.500 “ft2,000 Nominal value of on Share 1500 ——Te2.00 [0.50 Buying pice per share £9.35 [e102 [1.44 Broker’ commission £50 £76 280) ‘otal cost of shares, HoUdng commission [E37 490 [£32,625 [#17 340 Dividend (percentage ofrominal value) 14.5% 32% FETA Dividend) £900 £260 £136 Company A Total cost of shares = 4,000 x £9.36 + £50 = £37,490 Dividen 000 x £5 x 4.5% = £900 Please copy the table. Company B Nominal value of one share = £260 / (2,500 x 6.2%) = £2.00 Broker's commission = £32,625 — (2,500 x £13.02) = £75 ‘Company C Number of shares = (£17,340 - £60) / £1.44 = 12,000 Dividend (%) = £138 / (12,000 x £0.50) = 0.023 = 2.3% Page 3 of 6 Please show your workings.Begin to answer your question in a new page, QUESTION 3 (a)Difference in fixed costs (Y > X) = £200,000 Difference in variable costs (X > Y) = £25 Total costs of production are the same at £200,000 / £25 = 000 units (byTotal cost of production for Method Y = £2,500,000 + 8,000 x £190 = £4,020,000 (€)Tota cost of production = £2,500,000 + 12,000 x£190 = £4,780,000 Income fom sales = 12,000 x £399 = £4,788,000 Prof 8,000 (d)Total cost of production = £2,500,000 + 15,000 x £190 = £5,350,000 Income from sales = 13,500 x £399 = £5,386,500 Profit = £36,500 Page 4 of 6Begin to answer your question in a new page. QUESTION 4 @® @ “ @ “i a Ww ‘Overheads = Postage & telephone + Heating & lighting + Rent = £1,700 + £5,310 + £11,605 = £18,615 ‘Turnover = Net sales = Annual sales ~ Sales retums = £65,000 - £2,950 = £62,050 Overhead expenses ratio = Overhead / Turnover = £18,615 / £62,050 = 0.3 = 30% Current assets = Cash + bank + debtors + stock = £177 + £1,070 + £2,890 + £2,100 = £6,237 Current liabilities = Creditors = £2,310 Working capital ratio = Current assets / Current liabilities = £6,237 / £2,310 = 2.721 Net purchases = Purchases - Purchase returns = £42,400 - £2,251 £40,150 Average credit taken = Qwed to creditors x 365 = 2,310 365 Net purchases 40,180 Net sales = £62,050 Average credit given = Owed by debtors x 365= 2,880 x 365 = 17 days. Net sales 62,050 Average credit taken is the average time it takes Amelia to pay her creditors Neither of these the maximum time for receiving payments For question 4, b (Iv), it states ‘gives the maximum time it takes ‘Amelia to receive payment from her debtors’ Page 5 of 6Begin to answer your question in a new page. QUESTIONS (@) For Project Two, payback required: After year 1: £950,000 After year 2: £450,000, Payback occurs in year 3 after: 12x £460,000 / £500,000 months Payback period = 2 years 10.8 months (0)Project One is preferred as it has a shorter payback period However, the difference is small and possibly insignificant given that the figures are estimated (© @__ Present value for Project One in year 4 = 0,683 x £200,000 = £136,600 (i) Present value for Project two for years 1 and 2 combined = (0.909 x -£200,000) + (0.826 x £500,000) = £231,200 (@) New payback period for Project One = 2 years + 12 x (£700,000 - £200,000 - £300,000) / £300,000 = 2 years 8 months Page 6 of 6