Reference no: EM133115419
Questions
a) How is the Capital budgeting decision applicable to accountants
b) Equipment Z costs USD 200,000,000 and has a net cash flow of USD 70,000,000 per year for 7 years. A substitute equipment Y would cost USD 80,000,000 and generate net cash flows of USD 50,000,000 per year for 8 years. The required rate of return for both equipments is 12%. Using the NPV for the equipment which one of the two equipment should be accepted and why?
c) Clean go Services has provided you with the following information for the period April to December 2020.
|
Apr
|
May
|
June
|
July
|
Aug
|
Sept
|
Oct
|
Nov
|
Dec
|
|
300
|
500
|
400
|
700
|
600
|
500
|
800
|
1000
|
900
|
50% of the sales are cash and the rest are credit sales
30% credit sales are received one month after the sale
20% credit sales to be received two months after the sale
10%credit sales are received in the third month after the sale
Sales for February and March are 200 and 100, respectively
Purchases have a profit margin of 20% of total sales for each month and they are made a the month before the sale but paid for two months after the sale.
Prepare a cash budget for Clean go services for the period April to Nov 2020.
b) Advise the company on what measures it can take to stabilize it"s economic situation.