T1-Phe2035 - Acc1005 Foundations of Finance-Tutorial 7

7/14/22, 11:53 PM T1-PHE2035/ACC1005 FOUNDATIONS OF FINANCE
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T1-PHE2035/ACC1005 FOUNDATIONS OF
FINANCE
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LLGAY JAN 16, 2022 11:48PM
ANONYMOUS JUL 14, 2022 06:13AM

Link Clarisse
LLGAY MAY 25, 2022 05:24AM
https://padlet.com/linglgay/fsibosxyjok81av
(a) $6000 is a cash flow that reduces the net outlay to

change machines.
(b) Installation cost will be incurred in making the new
machine.
(c) $10 000 is a cash outflow that is part of the investment.
(d) Sunk cost- should not take into consideration.
Jonah ― ANONYMOUS
jerrell
a. Disposal value or salvage value is included because this
amount will help to break even and cover what was spent for
the initial outlay. So yes
Q1 b. I consider the installation cost as initial development
or allocated cost that is necessary. So yes
c. Additional investment is a cash outflow that is used for
different areas during the project development. So yes
Keris d. I consider the assessment of the suitability of the new
machine as a sunk cost
Kianboon
https://padlet.com/padlets/fsibosxyjok81av/exports/print.html 1/11
Clarisse
Kianboon
jerrell
1. scrap value, which is estimated to be only $10 000. Was
not included as a cash flow
2. according to the new pricing of $2.70/carton, the
respective cash inflows does not correspond to the value
calculated.
3. 500000: $40000 report cost is included. This is the
sunk cost and should be ignored
4. The interest rates should be based on real terms not
nominal; consider inflation.
d) sunk cost ― LLGAY

Q2
Keris
LLGAY JUL 14, 2022 06:43AM
i. The initial outlay of $500 000 is inclusive of cost of the

market research which is $40 000. This cost is a sunk cost
and should not be taken into consideration.
ii. The initial outlay includes purchase of two machines at
$230 000 each.
Second machine is not required until the end of the first
year. It would sit in the factory unused.
iii. Not appropriate to use the weighted average cost of
capital for this analysis. Company’s cost of capital reflects its
Q3
activities in all industries, not only just food processing.
iv. Real and nominal quantities are mixed in. The cash flow ANONYMOUS JUL 14, 2022 06:19AM
are in today’s Clarisse
prices (i.e. in real terms) but the weighted average cost of
capital is in nominal terms I don’t know sorry!
(i.e. including expected inflation).

Jonah ― ANONYMOUS
Idk also sorry :'(
Q3 Ash
a) Purchase of new trawler = - $600,000 - $15,000 + $140,00
= -$475,000
b) 9,000 tonnes x $30/tonne = $270,000 (Incremental

revenue)
9,000 tonnes x $10/tonne = $90,000 (incremental cost)
Maintenance contract = -$12,000
Incremental net cash flow = $168,000
c) Incremental revenue = $240,00 x (1+8%)^3 = $302,331

Incremental cost = -$80,000 x (1+8%)^3 = - $100,777
Incremental net cash flow in year 3 (Inflation- adjusted) =
$302,331 - $100,777 = $201,554
d) (1+i) = (1+i*) (1+p)

(1+30%) = (1+i*) (1+8%)
I* = 20.37% per annum
Kirthana
a. NCF = - 600000 - 15000 + 140000 = -$475000
pay in full dont take up installment payment with interest.
Q4 Ash
Q4
Straight line depreciation
Depreciation = ( $10,000 - $4700) / 5 = $1060
LLGAY JUL 14, 2022 07:33AM
Loss on sale of asset = residual value – (asset cost –

accumulated depreciation) = $4700 – $10,000 – ($1060 x5) =
$0
Total tax paid = ( 30% * $4,940) x 5 = $7,410
Reducing- balance depreciation
Loss on sale of asset = residual value – ( asset cost –

accumulated depreciation)= $4,700 – (10,000 -1060 – 848 –
678 – 543 – 434) = -$1737
Total tax paid = $1482 + $1546 + $1596 + $1637 + $1149 =

$7,410
both the total tax same however the losses and depreciation
amounts are different ― ANONYMOUS
Jin Teng (Jane)

LLGAY JUL 14, 2022 07:32AM
Kirthana
straight-line depreciation:
Annual Depreciation expense = (asset cost - residual value)/

asset life
= (10000-4700)/5 = $1060/year
Reducing-balance depreciation:
Annual Depreciation expense = (net book value - residual
value) * depreciation rate Q5
net book value = asset cost - accumulated depreciation = ANONYMOUS JUL 14, 2022 06:13AM
10000 - 4700 = 5300
part a)
Annual Depreciation expense = (net book value - residual
value) * depreciation rate = (5300 - 4700) * 0.20 = $120 using excel
Miguel
Nicholas
Soh Min
Yu Ting (5a)
Keris
to recalculate ― LLGAY

Marcelle
caln error for van B ― LLGAY
Yu Ting (5b)
to recal ― LLGAY
sylvia
Miguel
q5
Q6
Nicholas
Lava
Batrisyia
i’m stuck ― ANONYMOUS
LLGAY JUL 14, 2022 07:51AM
Keris
Q7
Lava
aleo
Batrisyia
Aleo
Chrystabelle
Q8
jerrell
Kianboon
Keris
Will choose A cause NPV higher ― ANONYMOUS
The question says "B&B ....ready to market". Hence it means it

is in year 0. The market research is done in year 0 and
launched in year 1 hence the need to discount the CF.
― LLGAY
※※※※※※

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7/14/22, 11:53 PM T1-PHE2035/ACC1005 FOUNDATIONS OF FINANCE

ANONYMOUS JUL 14, 2022 06:13AM

ANONYMOUS JUL 14, 2022 06:15AM

(a) $6000 is a cash flow that reduces the net outlay to

ANONYMOUS JUL 14, 2022 06:16AM

ANONYMOUS JUL 14, 2022 06:19AM

ANONYMOUS JUL 14, 2022 06:13AM

ANONYMOUS JUL 14, 2022 06:19AM

ANONYMOUS JUL 14, 2022 06:21AM

ANONYMOUS JUL 14, 2022 06:20AM

d) sunk cost ― LLGAY

LLGAY JUL 14, 2022 06:43AM

ANONYMOUS JUL 14, 2022 06:37AM

i. The initial outlay of $500 000 is inclusive of cost of the

ANONYMOUS JUL 14, 2022 06:23AM

ANONYMOUS JUL 14, 2022 06:21AM

b) 9,000 tonnes x $30/tonne = $270,000 (Incremental

c) Incremental revenue = $240,00 x (1+8%)^3 = $302,331

d) (1+i) = (1+i*) (1+p)

ANONYMOUS JUL 14, 2022 06:48AM

ANONYMOUS JUL 14, 2022 06:15AM

Loss on sale of asset = residual value – (asset cost –

Total tax paid = ( 30% * $4,940) x 5 = $7,410

Reducing- balance depreciation

Loss on sale of asset = residual value – ( asset cost –

Total tax paid = $1482 + $1546 + $1596 + $1637 + $1149 =

Jin Teng (Jane)

ANONYMOUS JUL 14, 2022 07:41AM

Annual Depreciation expense = (asset cost - residual value)/

ANONYMOUS JUL 14, 2022 06:19AM

ANONYMOUS JUL 14, 2022 07:25AM

ANONYMOUS JUL 14, 2022 06:19AM

ANONYMOUS JUL 14, 2022 06:19AM

ANONYMOUS JUL 14, 2022 06:18AM

ANONYMOUS JUL 14, 2022 06:29AM

caln error for van B ― LLGAY

ANONYMOUS JUL 14, 2022 06:24AM

ANONYMOUS JUL 14, 2022 06:29AM

ANONYMOUS JUL 14, 2022 06:34AM

ANONYMOUS JUL 14, 2022 06:35AM

ANONYMOUS JUL 14, 2022 06:22AM

ANONYMOUS JUL 14, 2022 06:27AM

i’m stuck ― ANONYMOUS

LLGAY JUL 14, 2022 07:51AM

ANONYMOUS JUL 14, 2022 06:26AM

ANONYMOUS JUL 14, 2022 06:27AM

ANONYMOUS JUL 14, 2022 06:46AM

ANONYMOUS JUL 14, 2022 06:48AM

ANONYMOUS JUL 14, 2022 07:58AM

Will choose A cause NPV higher ― ANONYMOUS

The question says "B&B ....ready to market". Hence it means it

ANONYMOUS JUL 14, 2022 06:18AM

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