Bob Leponge Ltd is considering the possibility of purchasing a multipurpose machine which cost Rs 1,000,000. The machine has an expected life span of 5 years. The machine generates Rs 600,000 per year before depreciation and tax, and the management wishes to dispose the machine at the end of 5 years which will fetch Rs 150,000. The depreciation allowable for the machine is 25% on written down value and the company's tax rate is 50%. The company approached a NBFC for a five- year lease for financing the asset which quoted a rate of Rs 28 per thousand per month. The cost of capital of the company is 12% and for lease option a discount rate of 16% applies. Required: a) Advice Bob Leponge Ltd whether it should opt for a five-year lease or purchase the multipurpose machine b) Discuss the plausible reasons as well as the dubious reasons for leasing You are provided with the following summarised information relating to Tottenham Hotspur Limite the year to 30 June 2005 Tottenham Hotspur Limited Balance sheet as at 30 June R3000 2004 2005 Fixed assets Freehold property 3.000 3.540 Motor vehicles 2850 3.200 Future and fittings 1.000 1.000 6.850 7,830 Currents assets Stock 900 300 Debtors 800 000 Prepayment 100 120 Cashia bank and in hand 300 210 2.100 2030 less Creditors: amount falling due within one year Creditors 1.000 Accruals 300 340 Taxation 280 400 Proposed dividends 100 100 1980 1849 120 190 1300 6.970 0.020 less Creditors amount falling due after one year 3% debenture 1.000 1.000 5.970 7020 Authorised sued Represented by Authorised foued Ordinary shares of Rat each 4.59 2.000 Profit and account 3.970 5.970 3.000 2.000 5.020 7020 Tottenham Hotspur Limited Trading and profit and toss account for the year ended 30 June 2003 4.000 3.500 R3000 Sales Less cost of goods Opening Stock Purchases SOD 700 2.100 2.800 SO 2.800 2.700 Les closing 1.800 2.100 2.500 2.800 Gross prom Lossex Administration Seling and distribution 700 200 8 100 Loan rest 990 LOSO Net profit before tax 1.150 1.550 Lesson 100 Net profiter tax 870 1,150 Retained profit 3.200 2,970 4070 5.120 Less dividend 109 Retained profit 3.970 The following rates relate to the sector in which Tours Hour Limited certes 2004 Adidati Current assets ratio 20 Foxed tumove rationes 15 Gearing (5) Growerown 35 Net prolt magn (8 15 Return on moed () 30 Stockumoverrames Trade creditors payment period days) 50 35 Trade detto collection periods Required: a Compute the significant ratios under the following headings for the two years to 30 June 2004 and 2005: liquidity efficiency b Using the ratios that you have calculated in Part a, comment on the financial performances of Tottenham Hotspurs Limited: for the year to 30 June 2005 as compared to the sector as a whole. Suggest possible reasons for changes in the ratios between the two years. d What are the limitations of ratio analysis as a method of evaluating performances of a company? You are given the following data for the year 2017 of an organization: % Details Variable Costs Fixed Costs Net Profit Sales Rs 600,000 300,000 100,000 1,000,000 60 30 10 100 Required: Calculate: 1. The Break-even point II. P/V ratio III. Margin of Safety: in percentage and in Rupees IV. From the information obtained draw the breakeven chart V. How do the content and verification of the reports differ between managerial and financial accounting? What is CVP analysis? How is it useful to managers