Online Exam BA7001- Financial Accounting & Financial Management

KU ID Numerous - 2061450
Online exam BA7001- Financial
accounting & Financial
management

KU ID Numerous - 2061450
TABLE OF CONTENTS
Question 1..................................................................................................................................3
(a)...........................................................................................................................................3
(b)...........................................................................................................................................4
Question 2..................................................................................................................................4
(a)...........................................................................................................................................4
(b)...........................................................................................................................................6
(c)...........................................................................................................................................6
Difference between financial and business risk.........................................................................6
Question 3..................................................................................................................................7
(a)...........................................................................................................................................7
(b)...........................................................................................................................................8
Question 4..................................................................................................................................8
(a)...........................................................................................................................................8
(b)...........................................................................................................................................9

KU ID Numerous - 2061450
Question 1
(a)
(i)
Tax benefits of capital allowances (amount in £)
Year 0 1 2 3 4
Cost of
purchase
and
installatio
n (A) 45000 31500 25830 21181 17368
Tax
allowance
(B) 13500 (45000*30%)
5670
(31500*18
%)
4649
(25830*18
%)
3813
(21181*18
%)
3126
(17368*18
%)
Written
down
value (A)
– (B) 31500 25830 21181 17368 14242
Total tax
allowance
(£)
13500+5970+4649+3813+3
126 = 30758
(ii)
For determining the feasibility of the project net present value approach is being
used. This approach is being utilized as it involves time value of money into consideration
while determining the cash flow of the company.
Year EBIT&D Depreciation Interest
Profit
before
tax
Profit
after tax
Profit after
tac before
depreciation
1 18000 7750 0 10250 1948 9698
2 14000 7750 0 6250 1188 8938
3 14000 7750 0 6250 1188 8938
4 12000 7750 0 4250 808 8558
Year 0 1 2 3 4
Cost of purchase and installation -45000
Working capital -6000 6000
Cash inflow 9698 8938 8938 8558
Total cash in (out) -51000 9698 8938 8938 14558
Present value factor r=8% 1 0.926 0.857 0.794 0.735
Present value -51000 8979 7662 7095 10700
Net present value -16563.3