Question 1
A firm whose cost of capital is 10% is considering two mutually exclusive projects X and Y, the details of which are:
Year Project X Project Y
Cost 0 Rs. 70,000 Rs. 70,000
Cash Inflows 1 Rs. 10,000 Rs. 50,000
2 Rs. 20,000 Rs. 40,000
3 Rs. 30,000 Rs. 20,000
4 Rs. 45,000 Rs. 10,000
5 Rs. 60,000 Rs. 10,000
Compute the Net Present Value at 10%, Profitability Index, and Internal Rate of Return of the two projects.
Question - 2
Nick Ltd acquired 100% of the issued capital of Wing Ltd on 1 July 2011 for $270000. The statements of financial position of the companies immediately after the acquisition are provided below. All assets have been reported following fair value.
|
Statement of Financial Position For the year ended 1 July 2011
|
|
Nick Ltd
|
Wing Ltd
|
|
$
|
$
|
|
Shareholders' equity
|
|
Share capital
|
450,000
|
180,000
|
|
General reserve
|
45,000
|
25,000
|
|
Retained earnings
|
140,000
|
20,000
|
|
Total shareholders' equity
|
635,000
|
225,000
|
|
Assets
|
|
|
|
Current assets
|
|
|
Cash at Bank
|
635,000
|
225,000
|
|
Accounts Receivable
|
20,000
|
10,000
|
|
Inventory
|
100,000
|
25,000
|
|
Non-current assets
|
|
|
Investment in Wing Ltd
|
270,000
|
----
|
|
Land
|
250,000
|
200,000
|
|
Plant & Equipment
|
100,000
|
80,000
|
|
620,000
|
280,000
|
|
Total assets
|
790,000
|
345,000
|
|
Liabilities
|
|
|
Current liabilities
|
|
|
Accounts Payable
|
40,000
|
10,000
|
|
Interest Payable
|
15,000
|
8,000
|
|
Non-current liabilities
|
|
Bank loan
|
100,000
|
102,000
|
|
Total liabilities
|
155,000
|
120,000
|
|
Net assets
|
635,000
|
225,000
|
Required
1. Calculate Goodwill (show workings)
2. Prepare consolidation journal entry at the date of acquisition.
3. Prepare consolidation worksheet.
4. Prepare the consolidated statement of financial position as at 1 July 2011 (immediately after the acquisition).