(2019-2020 2017 U * * E : M: 8 90 U TIN (13) 2017 HH 2 BJ ft 2019 = 12 H 22 H are into the link between the free ricing? What factors should be taken *P wo decimal places after the 1. Problems (Totally 40 points) 1. What is free cash flow? What is dividend capacity? Please explore into the link betwee cash flow and dividend capacity. (20 points) 2. What is transfer price? What is the purpose of transfer pricing? What factors shoul into account in the process of transfer pricing? (20 points) IL Calculation and analysis (Totally 60 points, please keep two decimal places decimal point) Wonderland Wonderland, whose currency is the Wonder Rand (WRL has faced extremely difficult economie challenges in the past 25 years because of some questionable economic policies and politica decisions made by its previous governments. Just over three years ago, a new government office and since then it has imposed a number of strict monetary and fiscal controls, including annual corporation tax rate of 40%. As a result, the annual rate of inflation has fallen rapidly from a high of 65% to its current level of 33%. It is expected that Wonderland's annual inflation rate will continue to fall in the coming few years as follows: Year Inflation rate 20-0% 15.0% 10.0% 3 and onwards en us. Then this the un Image Co Image Co, a large listed company based in the USA with the US dollar ($) as its currency, manufactures high tech electronic components for machinery, which it exports worldwide. Image Co is considering setting up an assembly plant in Wonderland where parts would be sent and assembled into a specific type of component, which is currently being assembled in the USA. Once assembled, the component will be exported to U.S. These exports will be invoiced in S. The current selling price of each component is $700 in US and this price is likely to increase by the average US rate of inflation from year 1 onwards (3%). The number of components expected to be sold every year are as follows: Year 1 2 3 4 Sales component units (000) 150 480 730 360 Currently, Image can earn a net contribution of S40 for each component unit locally (before tax). Assembly plant in Wonderland It is initially assumed that the project will last for four years. The four-year proie total investments of WR 24,000 million for fixed assets. Tax allowable depre $40 for each component unit assembled ar-year project will require wable depreciation is available (2019-2020 2017 U * * E : M: 8 90 U TIN (13) 2017 HH 2 BJ ft 2019 = 12 H 22 H are into the link between the free ricing? What factors should be taken *P wo decimal places after the 1. Problems (Totally 40 points) 1. What is free cash flow? What is dividend capacity? Please explore into the link betwee cash flow and dividend capacity. (20 points) 2. What is transfer price? What is the purpose of transfer pricing? What factors shoul into account in the process of transfer pricing? (20 points) IL Calculation and analysis (Totally 60 points, please keep two decimal places decimal point) Wonderland Wonderland, whose currency is the Wonder Rand (WRL has faced extremely difficult economie challenges in the past 25 years because of some questionable economic policies and politica decisions made by its previous governments. Just over three years ago, a new government office and since then it has imposed a number of strict monetary and fiscal controls, including annual corporation tax rate of 40%. As a result, the annual rate of inflation has fallen rapidly from a high of 65% to its current level of 33%. It is expected that Wonderland's annual inflation rate will continue to fall in the coming few years as follows: Year Inflation rate 20-0% 15.0% 10.0% 3 and onwards en us. Then this the un Image Co Image Co, a large listed company based in the USA with the US dollar ($) as its currency, manufactures high tech electronic components for machinery, which it exports worldwide. Image Co is considering setting up an assembly plant in Wonderland where parts would be sent and assembled into a specific type of component, which is currently being assembled in the USA. Once assembled, the component will be exported to U.S. These exports will be invoiced in S. The current selling price of each component is $700 in US and this price is likely to increase by the average US rate of inflation from year 1 onwards (3%). The number of components expected to be sold every year are as follows: Year 1 2 3 4 Sales component units (000) 150 480 730 360 Currently, Image can earn a net contribution of S40 for each component unit locally (before tax). Assembly plant in Wonderland It is initially assumed that the project will last for four years. The four-year proie total investments of WR 24,000 million for fixed assets. Tax allowable depre $40 for each component unit assembled ar-year project will require wable depreciation is available