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Answer to Question #51591 in Other Management for ALEXANDER M

Question #51591

Question 1

a). A company is considering the following investment projects.
Cash flows in Kes

Project Initial Outlay C1 C2
A (10,000) 10,000
B (10,000) 7,500 7,500 12,000
C (10,000) 2,000 4,000 3000
D (10,000) 10,000 3,000 3,000

Required:

Rank the projects according to:
i. Payback period (1 Marks)
ii. Accounting rate of return (1 Marks)
iii. Internal Rate of Return (2 Marks)
iv. Profitability Index (1 Marks)
v .Net present value (2 Marks)

Question 2.
a).The following is a summary of the financial statements of Hugo’s company Ltd.
Summary of financial statements
Balance sheet
Kes ‘000 Kes’000s
Non current assets
Buildings at cost 300
Less depreciation to date (255)
45
Equipment at cost 140
Less depreciation to date (119)
21
66
Current assets
Inventory 200
Accounts receivable 205
Bank 4
409
Total assets 475
Current liabilities
Accounts payable (245)
Net assets 230
Financed by:
Capital accounts
Balance at start of year 240
Add net profit 60
300
Less drawings (70)
230
Income statements
Sales 1,800
Less :Cost of goods sold 300
Opening inventory 1,300
1,600
Less closing inventory (200)
(1,400)
Gross profit 400
Less depreciation 22
Other expenses 318
(340)
Net profit 60
Calculate the following ratios:
i. Gross profit Margin. (1 Marks)
ii. Net profit Margin (1 Marks)
iii. Expenses as a % of revenue (1 Marks)
iv. Inventory turnover (1 Marks)
v. Return on capital employed (1 Marks)
vi. Current ratio (1 Marks)
vii. Acid test ratio (1 Marks)
viii. Accounts receivables ratio (1Marks)

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