Reference no: EM131286213
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 $270000. The statements of financial position of the companies immediately after the acquisition are provided below. All assets have been reported following fair value.
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Statement of Financial Position For the year ended 1 July 2011
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Nick Ltd
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Wing Ltd
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$
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$
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Shareholders' equity
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Share capital
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450,000
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180,000
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General reserve
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45,000
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25,000
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Retained earnings
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140,000
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20,000
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Total shareholders' equity
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635,000
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225,000
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Assets
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Current assets
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Cash at Bank
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635,000
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225,000
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Accounts Receivable
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20,000
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10,000
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Inventory
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100,000
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25,000
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Non-current assets
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Investment in Wing Ltd
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270,000
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----
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Land
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250,000
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200,000
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Plant & Equipment
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100,000
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80,000
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620,000
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280,000
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Total assets
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790,000
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345,000
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Liabilities
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Current liabilities
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Accounts Payable
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40,000
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10,000
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Interest Payable
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15,000
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8,000
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Non-current liabilities
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Bank loan
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100,000
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102,000
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Total liabilities
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155,000
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120,000
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Net assets
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635,000
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225,000
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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).
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