The management of J Co have heard about the concept of the time value of money.
Required:
(i) Complete the gaps in the following statement: The time value of money means that $1 now is worth (GAP 1) than $1 in the future. The reasons for this are risk, (Gap 2) and potential for earning a return e.g. interest.
(ii) Using a discount rate of 8%, and assuming that the cash flows arise at the end of a year, calculate the discounted payback period.
(i) Gap 1 more
Gap 2 inflation
(ii) Year Cash flow x DF Cumulative cashflow
0 -18,750 -18,750
1 5,000 x 0.926 = 4,630 -14,120
2 5,000 x 0.857 = 4,285 -9,835
3 5,000 x 0.794 = 3,970 -5,865
4 5,000 x 0.735 = 3,675 -2,190
5 5,000 x 0.681 = 3,405 +1,215
As the cash flows arise at the end of the year payback will be 5 years Alternative working
The project will payback when $18,750 = $5,000 x AF @ 8%
AF(1-n)=3.75
The annuity factor for 4 years is 3.312, and 5 years is 3.993. Therefore the payback must occur at 5 years as the cash flows arise at the end of the year.
多做几道
What was the actual usage of direct material during February?
What was the selling price variance for February?
What was the sales volume profit variance for February?
【简答题】
From the information provided calculate
(i) The actual price paid per kg for the direct material
(ii) The standard quantity that should have been used for actual production.
Which of the following is likely to lead to the variances stated above?
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