Reference no: EM132948764

Questions -

Q1. EFG' accounting year ends on 12/31. On 1 January 2019 a new machine costing $. 2,000,000 is bought. It expects to sell the machine at the end 2020 for $350,000.Tax rate is 30%. Tax-allowable depreciation is allowed at 25% on the diminishing balance basis, and a balancing allowance is available on removal of the asset. Assume Cost of capital is 15% per year, compute the closest present value of the tax savings from the tax- allowable depreciation at 1 January 2019?

A. $391,000

B. $268,000

C. $243,500

D. $719,000

Q2. Which of the following is least likely included when calculating the appropriate cash f lows for analysis of whether to add a new product to the product line?

A. Estimated depreciation on the new facility and equipment for tax purposes.

B. Costs of a survey done last month to decide

C. Reduced sales that resulted from the introduction of new product

D. Increase in Working Capital requirement

Q3. If inventory has a high risk of obsolescence. Which of the following features would be most appropriate?

A. A high quick ratio

B. A high debt ratio

C. A high number of days sales outstanding in ending trade receivables

D. A low inventory turnover ratio

Q4. Below are accounts of a company as at 31 December 2019 (in hundreds): Non-current assets 1,000; Inventories 200; Receivables 150; Cash 100; Current liabilities 200. The company doubled its sales and there is no plan to invest in any new non-current assets, inventories, receivables and payables however all move in line with sales. What cash balance after a year will result if the non-current assets were all land, no new capital was raised and all profits were paid out as dividends?

A. $100,000 cash available on hand

B. $200,000 cash available on hand

C. $50,000 overdrafts

D. $100,000 overdrafts

Q5. IHK Co. has P1.2 million in assets that are currently financed with 100% equity. IHK Co.'s EBIT is P300,000, and its tax rate is 30%. If IHK Co. changes its capital structure (recapitalizes) to include 40% debt, what is IHK Co.'s ROE before and after the change? Assume that the interest rate on debt is 5%. ROE at 100% equity ROE at 60% equity

A. 17.5% 26.8%

B. 25.0% 26.8%

C. 25.0% 37.5%

Q6. Which of the following is/are elements of fiscal policy?

1. Governments increase or decrease taxes 2. Governments increase or decrease the size of the money supply 3. Governments increase or decrease the amount it spends

A. 1 only

B. 1 and 3 only

C. 2 and 3 only

D. 1, 2 and 3

Q7. Which of the following is least likely to be a motive for stock market listing?

A. Improvement of the company's image

B. Transmission of capital to other users

C. Improvement of existing owners' control over the business

D. Entry to a broader pool of finance