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1. Financial management 2, Management accounting
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Looking for an exam taker for my Accounting and Finance online test due to the 18th of May 2022 at 9:30 am.
Requirements: the test starts at 9:30 am. The test must be done/completed in 90 minutes and forwarded to me from the helper by the time due.
Additional Instructions:
Accounting and Finance Exam (50%)
Online (Open Book)
May 2022
You will need to answer three questions in the exam.
Section A: Answer both questions
1. Financial management: Investment Appraisal
2. Financial Management: Sources of Finance
Section B: Answer one question
35 marks
35 marks
30 marks
There will be two questions on the paper to choose from. The possible topics are:
Management accounting: absorption costing
Financial accounting: interpreting company accounts
Financial management: Investment appraisal or sources of finance
ACCOUNTING & FINANCE PRACTICE EXAM QUESTIONS
INVESTMENT APPRAISAL
Every Limited is considering two investment projects, S and T, but only has sufficient cash to undertake one of them. The projected cash flows of the two potential investments are set out below. Every Limited has a cost of capital of 10%.
CASH FLOWS
S
T
£000
£000
Initial investment
(600)
(600)
Cash inflows Year 1
200
100
Cash inflows Year 2
250
200
Cash inflows Year 3
150
250
Cash inflows Year 4
190
200
Cash inflows Year 5
100
150
Cash inflow from sale of investment at the end of Year 5
90
130
REQUIRED:
(a) For both potential investments calculate the payback period.
(6 marks)
(b) For both potential investments calculate the net present value (NPV).
(21 marks)
(c) In your own words, discuss which project should be selected and why.
(8 marks)
TOTAL: 35 MARKS
Discount factors @ 10%:
Year 0 1
Year 1 0.9091
Year 2 0.8264
Year 3 0.7513
Year 4 0.6830
Year 5 0.6209
SOURCES OF FINANCE
A business wants to raise £2,000,000 for an expansion. The following options have been suggested:
(i) Borrow from the bank at 8% interest
(ii) Issue ordinary shares at their par value of 50p, which will require an annual dividend payment of 2.9p per share
(iii) Issue preference shares with a par value of 55p, which requires a fixed dividend of 3.65p per share.
REQUIRED:
In your own words, describe the main features of the three finance options, identifying the cash outlay required and explaining the advantages and disadvantages of each of them.
TOTAL: 35 MARKS
ACCOUNTING & FINANCE PRACTICE EXAM QUESTIONS
SECTION B
INVESTMENT APPRAISAL
The projected cash flows of the two potential investments are set out below.
CASH FLOWS
Project 1
Project 2
£000
£000
Initial investment
(900)
(900)
Cash inflows Year 1
200
250
Cash inflows Year 2
200
280
Cash inflows Year 3
300
280
Cash inflows Year 4
300
230
Cash inflows Year 5
450
200
The company’s cost of capital is 12%.
REQUIRED:
(a) For both potential investments calculate the net present value (NPV).
(24 marks)
(b) In your own words, discuss which project should be selected and why on the assumption that the company has limited capital and so can only undertake one of the projects.
(6 marks)
TOTAL: 30 MARKS
Discount factors @ 12%:
Year 0 1
Year 1 0.8929
Year 2 0.7972
Year 3 0.7118
Year 4 0.6355
Year 5 0.5674
SOURCES OF FINANCE
In your own words, describe the characteristics, advantages and disadvantages of the following sources of finance:
(a) Share issue
(b) Debt
(c) Retained earnings
TOTAL: 30 MARKS
ABSORPTION COSTING
(a) Bumper Bike Manufacturing Company makes bikes and presents the following data for year 2021:
· Direct materials per bike: £240
· Direct labour per bike: £280
· Planned production: 10,000 bikes
· Variable manufacturing overhead expense per bike: £100
· Variable selling and administrative expenses per bike: £40
· Fixed manufacturing overhead expenses: £1,200,000
· Fixed selling and administrative expenses: £800,000
Required:
Using the data given above, compute the production cost of one bike under an absorption costing system. Overheads will be absorbed based on units of production.
(10 marks)
(b) Christophe’s Crane Manufacturing Company makes three models of crane and presents the following data for their newest model for year 2021:
· Direct materials per crane: £1,200
· Direct labour per crane: £1,400
· Variable manufacturing overhead expense per crane: £500
· Variable selling and administrative expenses per crane: £200
· Fixed manufacturing overhead expenses: £2,100,000
· Fixed selling and administrative expenses: £1,600,000
Using the data given above, compute the production cost of one new model crane under an absorption costing system. Overheads will be absorbed based on labour hours. Total labour hours for all production for the year are 700,000 and all labour is paid at £14 per hour.
(20 marks)
TOTAL: 30 MARKS
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