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Names: Amélie and Félix Rodrigue, 24 years old.
Current situation: Amélie and Félix live in an apartment. They plan to buy a house in five and a half years. They would like to be able to increase their current down payment to the maximum.
They would like to accumulate $ 45,000 to add to the down payment.
Gross family income: $ 152,128
Salary increases confirmed: 2% per year for the next five years.
Down payment accumulated to date: $ 30,000
Children: the family has no children yet. They plan to have two children after buying the house.
Wishes: Amélie would like to live in a neighborhood less than 10 years old.
Possible investments: 6-month certificates at 3% per year compounded monthly.
Prepare the Income Statement of Waltons Manufacturers for the month ended 28 February 2021 using the absorption costing method.
INFORMATION
The following forecasts were obtained from the accounting records of Waltons Manufacturers for the month ended 28 February 2021:
Inventory on 01 February 2021
Nil
Production
25 000 units
Sales
23 000 units
Selling price per unit
R100
Manufacturing costs:
Fixed manufacturing costs
R240 000 per month
Variable manufacturing costs per unit
R42
Marketing costs:
Sales personnel’s salaries and advertising
R40 000 per month
Delivery costs
R5 per unit sold
Administration costs:
Salaries
R50 000 per month
Other office costs
R4 per unit sold
Machine A Machine B Machine C
Original cost $79,000 $110,000 $244,000
Estimated life 7 years 8 years 10 years
Salvage value Nil Nil $30,000
Estimated annual cash inflows $30,000 $ 60,000 $58,500
Estimated annual cash outflows $ 7,000 $ 35,000 $18,500
If the projects cannot be repeated, which machine should ABC Ltd choose based on the NPV criteria at an 8% cost of capital? (9 marks)
5.2 A machine was purchased for R650 000. The rate of depreciation of the machine is 25% per year on the educing balance and the cost of a new machine increases by 13% per year.
5.2.1 Calculate the value of the old machine after three years. (2)
5.2.2 Calculate the replacement cost of the machine after three years if the old machine is traded in. (2)
5.2.3 An equal amount is deposited monthly into a sinking fund for the replacement of the old machine. Calculate the monthly instalment if interest is earned at a rate of 7,5% per year, compounded monthly.
a. Provide the # of bonds needed to fund the liability and the cost.
b. If the reinvestment rate falls from 3% to 2%, what is the projected deficit?
c. To prevent a deficit, explain how immunization can work, how it can help you and what conditions are required.
Required:
1. Find the equal quarterly payment amount
2. Draw the amortisation schedule for the loan repayment
3. What is the interest portion paid on the 6th payment?
4. What is the total interest paid after the 12th payment?
#339914 on Dec 2023