CAPEX Answer Sheet (Test Number I)

Your Full Name Roll No

MODEL SOLUTION
Answer to question number 1
Question No. The Question Your Response
1 (a) The arrangement between M/s Cash Crazy Limited
and M/s Money Provider Limited (as mentioned in
the question) is commonly called
INVOICE DISCOUNTIN
!RR!NEMENT
1 (b) Please mention the e!act name o" the means o"
#ro$ect "inance that the concerned com#any is
contem#lating resorting to
ISSUE OF CONVERTI"LE
DE"ENTURES
1 (c) %uch a #henomenon (as mentioned in the question)
may arise i" the concerned division had ta&en a
#articular action during the year '(1)* +ou need to
mention , what action-
DILUTED #i.e. $ispose$ o%%&
UN'RODUCTIVE !SSETS
DURIN YE!R ()*+
1 (d)
First Question
.ad the com#any com#uted the /00 in the instant
case and had ta&en the decision to re$ect this
investment #ro#osal would you have su##orted their
decision- Explain with adequate reasons.
YES
The /00 measure would be a
reliable measure in this case (no
interim cash "lows)* The /00 1 2
3 (in this case) is less than
investor4s e!#ected return o" 53
(as a##licable in this case) and
hence the #ro#osal may be re$ected
Se,on$ Question
2hat may be commented about the actual 6P7 o"
this investment o#tion- Explain with adequate
reasons.
DEFINITELY NE!TIVE
8##lying 23 as hurdle rate 6P7
1 (* Thus i" 53 was a##lied as the
hurdle rate (as a##licable) 6P7
would have been negative in the
instant case (5 9 2 , given)*
Answer to question number 2
The Compute$ N'V #in Rs La-hs& . !s Re/uire$ 'ositi0e 1 Ne2ati0e
33 #!ppro4& 'OSITIVE
%u##orting 2or&ings (in res#ect o" answer to question no ') , given below
Computation of Operatin Cash Inf!ows from the propose" waste pro#essin business
Details Year * Year ( Year +
%ales )'( ):( ;'(
8ttributable Material Cost <( =( >(
2age Cost ?( :< 1((
@verhead Cost (0elevant Portion @nly) =( >( 11(
Ae#reciation Charges <( ); ''
/nterest Charges 1: 1' ?
Total 5!#enditure ';: '>1 )':
PBT =' :> >'
(Ta! C ;(3) ('>) ()?) ()=)
P8T ;) <) <<
8dd Bac& Ae#reciation <( ); ''
Operatin Cash Inf!ows $% &' ''
Computation of In#rementa! Cash (!ows ) As per the i*en #ase fa#ts+
Details Year ) Year * Year ( Year +
@#erating Cash /n"lows (as com#uted above) >) := ==
Loss o" 0ent 0ecei#ts (Ta! 8d$usted) (?) (?) (?)
/nvestment in 2or&ing Ca#ital (/nventories) ('() ()<)
Com#ensation #ayable to the Contractor ()()
Contractor4s charges saved (Ta! 8d$usted) )( )( )(
0e#ayment o" Loan Princi#al (<() (<() (<()
%alvage 7alue o" the Machine '(
Ta! %hield on Loss o" %ale o" Machine 1(
Total /ncremental Cash Dlows (<() )' ?1 :1
AD C 1<3 (Eiven) 1*(( (*:= (*=? (*??
Present 7alue (P7) (<() ': ;? <)
NP, - '' (Positi*e)
Note
8) 2A7 o" the machine at the end o" ) years 1 1<( , (<( F ); F '') 1 ;;* %alvage 7alue 1 '(*
There"ore loss on sale o" machine 1 ;; , '( 1 0s '; La&hs* Ta! shield on such loss on sale o"
machine 1 ';G ;(3 1 1( la&hs (a##ro!)
B) 8ll "igures (given above) had been rounded o"" to the nearest la&h
C) 8##ortioned general "actory overhead e!#enses are in the nature o" irrelevant cost in this case*