P2 Exam Dumps - Advanced Management Accounting
The net present value of the cost of operating a machine for the next 4 years is £6,340. The discount rate used is 10%.
What is the equivalent annual cost and the present value of the cost in perpetuity of operating this machine?
Use discount factors to 3 decimal places.
Juan is looking to invest in the mining industry. He has narrowed his options down to two rival companies, both with sales of £200m. Company A has an EBIT of £10m whereas Company B has an EBIT of £14m.
This would suggest that Company B is the better investment but Juan is suspicious that Company B has more financial backing than Company A.
Which ratios will tell him which company will use his investment the best?
The management of a leisure company, who are risk averse, have just approved an investment in a new amusement park. The country in which the amusement park will be located has a warm and mostly dry climate throughout the year.
A number of specific risks related to this investment have been identified as follows.
(1) Losses of very small amounts of revenue due to poor weather.
(2) A significant financial liability may arise due to the injury of a member of the public.
(3) Loss of several days of revenue due to rides being unavailable because of poor maintenance routines.
(4) Income fraud as a consequence of the high levels of cash handled by employees.
Using the TARA framework, which is the most appropriate way of managing each of these risks?
A product requires one each of three different components.
Faulty components are identified only at the end of the manufacturing process.
The following average fault rates have been identified:
Component A – 1 in 100
Component B – 1 in 20
Component C – 1 in 10
The probability that a unit of finished product contains no faulty components is:
A company has just received the latest in a series of annual payments; this payment was $620. The annual payments are expected to continue for three more years with each payment being increased by the expected rate of inflation. The real cost of capital is 8% per year and the expected rate of inflation is 6% per year.
What is the present value of the future payments the company expects to receive?
Give your answer to the nearest $.
Company TTM has the opportunity to invest $60,000 in a project. The project is anticipated to produce annual returns of $12,500 each year for 8 years. The cost of capital is 12%.
What is the net present value of the project? Give your answer to the nearest whole number.