Required: (a) Unique Ltd's managers sought your advice regarding which of the projects to select. (i) Calculate the payback period (Assume that all cash receipts and payments occur evenly during the year). [5 Marks] (ii) Advise Unique Ltd's managers as to which project to select in (a) (i). [1 mark] (iii) Calculate for each project the accounting rate of return, using the average annual profit and the initial investment. ODOC [5 Marks) DOO 000 For Project A: calculate the breakeven point in sales revenue for year 4. [4 marks] (b) (c) (i) Calculate the NPV of Project A using a cost of capital of 9%. (Assume that all cash flows occur at the year-end). (4 marks] Comment on the viability of the project. [1 mark] dolls romans Assuming the material and labour costs are all variable costs; calculate the unit cost under marginal costing and absorption costing for year four of project A. 8,000 units of the product are expected to be produced and sold. (d) (5 marks] Total.. [25 marks] SECTION B ANSWER BOTH QUESTIONS QUESTION B1 Unique Ltd is considering two mutually exclusive projects to expand its market. The projects details are as follows: Project A: This project requires an initial investment of 320,000 with a four-year life span. Forecasted sales and operating expenses are shown in the table below: Year 1 370,000 Sales revenue () Material cost () 132,000 Year 2 320,000 120.000 58,000 18,500 Year 3 390,000 128,000 62,000 17,500 Year 4 320,000 130,000 54,000 18,300 Labour cost () 60,000 15,000 Other variable (E) Other fixed cost (not including depreciation) 23,000 26,000 28,000 27,000 Project B: This project requires an initial investment of 380,000 with a four-year life span. The forecasted annual accounting profit after depreciation is 46,000 over four years. The following information applies to both projects: . Residual value at the end of the economic life of each project is nil, and straight line depreciation applies. All sales are expected to be cash sales, and operating expenses are paid for in cash as and when incurred. . Depreciation is the only adjustment difference between accounting profit and cash flows for each project. Required: (a) Unique Ltd's managers sought your advice regarding which of the projects to select. (i) Calculate the payback period (Assume that all cash receipts and payments occur evenly during the year). [5 Marks] (ii) Advise Unique Ltd's managers as to which project to select in (a) (i). [1 mark] (iii) Calculate for each project the accounting rate of return, using the average annual profit and the initial investment. ODOC [5 Marks) DOO 000 For Project A: calculate the breakeven point in sales revenue for year 4. [4 marks] (b) (c) (i) Calculate the NPV of Project A using a cost of capital of 9%. (Assume that all cash flows occur at the year-end). (4 marks] Comment on the viability of the project. [1 mark] dolls romans Assuming the material and labour costs are all variable costs; calculate the unit cost under marginal costing and absorption costing for year four of project A. 8,000 units of the product are expected to be produced and sold. (d) (5 marks] Total.. [25 marks] SECTION B ANSWER BOTH QUESTIONS QUESTION B1 Unique Ltd is considering two mutually exclusive projects to expand its market. The projects details are as follows: Project A: This project requires an initial investment of 320,000 with a four-year life span. Forecasted sales and operating expenses are shown in the table below: Year 1 370,000 Sales revenue () Material cost () 132,000 Year 2 320,000 120.000 58,000 18,500 Year 3 390,000 128,000 62,000 17,500 Year 4 320,000 130,000 54,000 18,300 Labour cost () 60,000 15,000 Other variable (E) Other fixed cost (not including depreciation) 23,000 26,000 28,000 27,000 Project B: This project requires an initial investment of 380,000 with a four-year life span. The forecasted annual accounting profit after depreciation is 46,000 over four years. The following information applies to both projects: . Residual value at the end of the economic life of each project is nil, and straight line depreciation applies. All sales are expected to be cash sales, and operating expenses are paid for in cash as and when incurred. . Depreciation is the only adjustment difference between accounting profit and cash flows for each project
