Financial Decision Making Assignment Question Answer

Added on - 21 Feb 2021

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Financial decisionmaking
Question 1.Payback period method- This can be defined as a kind of investment appraisal technique inwhich time needed to earn back amount invested in any project or assets. It is very useful forassessing the risk linked with a project. Herein, below calculation of given question is done thatis as follows:Initial cash outlay: RM 33000Cash flow after tax: RM 8000, 10000, 12000, 12000, 5000YearCash flowCumulative cash flow180008000210000(8000 + 10000) = 18000312000(18000 + 12000) =30000412000(30000 + 12000) =4200055000(42000 + 5000) = 47000Payback period= Year before full recovery + Unrecoverable cost at the beginning of year / Cashflow during the year= 3 + 3000 / 12000=3.25 yearsSo the payback period for the new project is of 3.25 years which means cost of investment willbe recovered in 3.25 years.Working Note:Year before recovery= 3 years.Unrecoverable cost at the beginning of year= 33000-30000: 3000Cash flow during the year = 42000-30000: 12000Question 2.(a) The purchasing cost of per part is of RM 150 and company is operating at 70 % of itscapacity. The total cost in manufacturing of per part is of RM 165 that is assumed at 100%. So atthe 70% the manufacturing cost of per part is calculated below:
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