User Account

All Pages

capital investment decision, Managerial Accounting

Assignment Help:
Your company is considering investing in its own transport fleet. The presentposition is that carriage is contracted to an outside organization. The life of thetransport fleet would be five years, after which time the vehicles would have tobe disposed of.The cost to your company of using the outside '' organization for its carriageneeds is £250,000 for this year. This cost, it is projected, will rise 10% per annum over the life of the project. The initial cost of the transport fleet wouldbe £750,000 and it is estimated that the following costs would be incurredover the next five yearsDrivers'' Repairs & Other Costs Maintenance Costs(£) (£) (£)Year 1 33,000 8,000 10,000Year 2 35,000 13,000 15,000Year 3 36,000 15,000 20,000Year 4 38,000 16,000 16,000Year 5 40,000 18,000 22,000It is projected that the fleet would be sold for £150,000 at the end of year 5.To raise funds for the project your company is proposing to raise a long-termloan at 12% interest rate per annum.You are told that there is an alternative project that could be invested in usingthe funds raised, which has the following projected results:Payback = 3 yearsNet present value= £140,000.Internal Rate of Return = 15% As funds are limited, investment can only be made in one project.
Note:
The transport fleet would be purchased at the beginning of theproject and all other expenditure would be incurred at the end of eachrelevant year.Required:(a) Prepare a table showing the net cash savings to be made by the firmover the life of the transport fleet project.(b) Calculate the following for the transport fleet project:(i) Payback period(ii) Net present value(iii) Internal Rate of Return(c) Write a short report to the Investment Manager in your company outliningwhether investment should be committed to the transport fleet or thealternative project outlined. Clearly state the reasons for your decision

Related Discussions:- capital investment decision

Jit and management accounting , JIT and Management Accounting Manageme...

JIT and Management Accounting Management accountants in many organizations have been criticized because of their failure to change their managing accounting system to reflect

Stating dependent variable-cost estimating relationship, State (or select) ...

State (or select) the dependent variable (Y) Will the CER be employed to estimate price, labor hours, cost, material cost, or some other measure of cost? Will the CER be employ

Directing, Directing There are number of good plans which are never rea...

Directing There are number of good plans which are never realized. To realize a plan it requires the initiation and   direction of the number of actions. Often, thes

Example of credit standards, The current sales of M/s ABC are Rs.100 lakhs....

The current sales of M/s ABC are Rs.100 lakhs. Through relaxing the credit standards the firm can produce additional sales of Rs.15 lakhs on that bad debt losses would be 10 percen

Negotiated prices-transfer pricing methods, Negotiated prices Where mar...

Negotiated prices Where market based prices are not applicable, it has been argued that allowing managers to bargain with each other in order to establish transfer prices devel

Decision making process, full explaination with diagram

full explaination with diagram

Cvp, THE BREAK EVEN POINT

THE BREAK EVEN POINT

International transfer pricing-compliance and documentation, International ...

International transfer pricing Transfer pricing is a perennial issue, within the international tax community (Richard Casna, Accounting and Business, in the year February 1988)

Homework, costs/per unit labor ... $ 4 materials ...5 fixed cost... $ 12 ...

costs/per unit labor ... $ 4 materials ...5 fixed cost... $ 12 determine the break even point in units if the seeling price is $ 19 determine the break even point in sales at

Breakeven point, A company manufactures a one product. Estimated cost data ...

A company manufactures a one product. Estimated cost data regarding this product and other information for the product and the company are as follows: Sales price per unit Rs.2000

Write Your Message!

Captcha
Order Assignment

Featured Services

Order Now

Popular Subjects

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd