BAM4013 Financial Decision Making in Replace Project 2026 | College of Bolton
| Academic one year | 2026 |
|---|
BAM4013 Financial Decision Making in Replace Project
Query 1
Segment-A
Robert Company Ltd is brooding about which of two initiatives it could maybe get. You’re the Finance Director (FD) and possess decided that the project with the increased NPV ought to be chosen, whereas the Managing Director (MD) thinks that the premise is unsuitable on yarn of both initiatives possess the an identical dimension of lifestyles. The director anticipates a fee of capital of 10% cashflows of the initiatives are as follows: Additionally, the director plans to practice the 2 predominant solutions of appraisal diagnosis: Web Contemporary Price (NPV) and Payback Length.(25 Marks)
| one year | Project A | Project B |
|---|---|---|
| 0 | (100000) | (100000) |
| 1 | 40000 | 20000 |
| 2 | 40000 | 30000 |
| 3 | 20000 | 50000 |
| 4 | 10000 | 40000 |
| 5 | 10000 | 30000 |
Required:
a)Calculate the NPV for initiatives A and B (3 Marks)
b)Calculate the Payback Length for Projects A and B (3 Marks)
c)Showcase the outcomes in (a) and (b) above. (3 Marks)
d)Assessment the deserves of NPV over Payback Length and dispel the supervisor’s confusion. (6 Marks)
Segment-B
Answer the A couple of-Different Questions
(i)What is the variation between money influx and outflow? (3 Marks)
a)Receipts from gross sales and purchases of resources and charges
b)Receipts on purchases of resources and charges
c)Purchases and payments of resources and charges
(ii)Why is the NPV methodology of investment appraisal superior to all others? (2Marks)
a)It considers the time value of money.
b)It’s per the money whisk along with the movement of the payback length.
c)It ends in the minimisation of the shareholders’ wealth.
(iii)Which of the following is a decision rule for NPV? (2 Marks)
a)If NPV is zero, the project breaks even.
b)If the payback length is zero, the project breaks even.
c)If NPV is negative and payback is definite, the project is viable.
(iv) A capital investment project is the spending of money now to receive advantages (or decrease charges) in future years. (3 Marks)
a)Honest
b)Untrue
Query 2
Businesses retain assorted monetary files to examine the strengths and weaknesses in performance the tell of ratios of the industry and to receive definite that that taxes are paid. These files include income statements(Desk 1) and Statements of Financial Situation(Desk 2). (25 Marks)
Desk 1: Profits Whisper (Income and Loss)
| Carl Company Ltd | ||
|---|---|---|
| Profits Whisper for the one year ended 31 December | ||
| 2021 | 2022 | |
| £ | £ | |
| Income | 64000 | 56000 |
| Cost of gross sales | 42000 | 34000 |
| Spoiled profit | 22000 | 22000 |
| Operating Charges | 15000 | 13000 |
| Operating Income | 7000 | 9000 |
| Finance fee (Hobby payable) | 2200 | 1300 |
| Income before tax | 4800 | 7700 |
| Tax | 350 | 600 |
| Web Income | 4450 | 7100 |
Desk 2: Whisper of Financial Situation (Steadiness Sheet)
| 2021 | 2022 | |
|---|---|---|
| £ | £ | |
| Non-Contemporary Assets (Fastened Assets) | 13850 | 13600 |
| Contemporary Assets: | ||
| Stock | 14000 | 13500 |
| Receivables | 16000 | 15000 |
| Cash and money an identical | 500 | 500 |
| Entire Contemporary Assets: | 30500 | 29000 |
| Entire Assets | 44350 | 42600 |
| Equity and Liabilities: | ||
| Equity | 14350 | 14000 |
| Non-contemporary Liabilities | 6000 | 6500 |
| Contemporary Liabilities: | “Please turn to page” | |
| Replace payables | 20000 | 19100 |
| Tax payables | 4000 | 3000 |
| 44350 | 42600 |
Required:
Segment A:
Answer the A couple of-Different Questions (MCQ) below:
Write the resolution ultimate as an illustration(i) a, b or c
(i) What does an income assertion present? (2 Marks)
a)The monetary performance of a industry
b)A gross sales projection for a industry
c)The rate of a industry
(ii) What ought to be taken some distance flung from gross sales income to present the irascible profit of a industry? (3 Marks)
a)Charges
b)Charges and fee of gross sales
c)Cost of gross sales
(iii) Make a choice out which form (below) is legally required to create and put up an income assertion? (2 Marks)
a)Partnership
b)Sole trader
c)Limited firm
(iv) Which of the following formulas is continuously known as a recent ratio? (3 Marks)
a)(contemporary resources – closing stock)/ contemporary liabilities.
b)contemporary resources/ contemporary liabilities
c)fee of gross sales/ common stock
Segment B: Calculation of Ratios
(a)Using Tables 1 and 2, calculate the assorted ratio categories listed in Desk 3below for 2021 and 2022. (12 Marks)
(Showcase your workings on Desk 3)
b) In step with the dwell consequence in Query A of Segment B: Assessment the pattern in performance for 2021 and 2022 in the case of the ratio forms calculated.(3 marks)
Desk 3: Ratio Analysis
| Profitability Ratios | 2021 | 2022 |
|---|---|---|
| Spoiled profit margin | ||
| Web Income margin | ||
| Liquidity Ratios: | ||
| Contemporary Ratio | ||
| Rapidly Test (Acid Test) | ||
| Efficiency: | ||
| Receivable collection length | ||
| Payable fee length |
Query 3
Mehedi Company Ltd makes tell of Destroy-even diagnosis (also identified as Cost-Volume-Income(CVP) diagnosis) to behold the results on its future profit in appreciate to adjustments in mounted fee, variable fee, gross sales stamp, and amount. This helps the firm in its momentary decision-making.(25 Marks)
Segment A:
Answer the MCQs on Breakeven by selecting the final phrase form replace.
(i)What is the ruin-even level? (2 Marks)
a)The level at which a industry makes a profit.
b)The level at which a industry makes a loss.
c)The level at which income and total charges are the an identical, which scheme the industry makes neither a profit nor a loss.
(ii)Settle the final phrase form formula for computing the ruin-even level. (3 Marks)
a)Variable charges ÷ (selling stamp − mounted charges)
b)Fastened charges ÷ (selling stamp − variable charges)
c)Selling stamp ÷ (mounted charges − variable charges)
(iii)If mounted charges are £21,000, the selling stamp is £7, and the variable fee is £4per unit, what is the ruin-even level? (3 Marks)
a)7,000 items
b)4,000 items
c)4,500 items
(iv)What does the margin of safety present?(2 Marks)
a)The amount at some level of which gross sales exceed the ruin-even level.
b)The replace of gross sales a industry wants to receive to ruin even.
c)The utmost replace of gross sales a industry can receive.
Segment B:
Mehedi Company Ltd would take care of to give a boost to its gross sales of toiletries. The next files are on hand in Desk 4:
Desk 4:
| Carson cleaning soap | Dove cleaning soap | |
|---|---|---|
| Sales Volume Fashions | 4300 | 5600 |
| £ | £ | |
| Unit Selling Price | 8 | 10 |
| Unit Variable Charges | 4 | 5 |
| Fastened Charges | 7000 | 20000 |
From Desk 4
a)Calculate the Breakeven aspects (in items) for the coconut and pomegranate. (6 Marks)
b)Calculate Margins of Safety for the coconut and pomegranate. (5 Marks)
c)Seriously overview the advantages and disadvantages of the Breakeven level. (4 Marks)
Query 4
Mediterranean Ltd (a medium-sized private firm) and Oceanic Ltd (a tiny-sized private firm) both commerce in the hospitality industry. The Boards of Directors of both companies are confronting a diversity of alternatives to evaluate on how their industry could perchance perchance be financed to merge their industry.
Required:
Segment-A
a.Distinguish between merger and acquisition of a industry with examples.(7 Marks)
b. Categorise and significantly focus on the foremost sources (long-term and momentary alternatives) of finance that the above LTD Firms could perchance perchance even possess salvage entry to to. Clarification must near with an instance. (8 Marks)
Segment-B
1) What is the reason of a money funds? (2 Marks)
a)To present planned receipts and payments and to aid receive decisions.
b)To present the profit or loss of a industry
c)To present the associated fee of a industry
2) What does industry expansion mean? (2 Marks)
a)When an proprietor sells a share in their industry
, b)When a industry moves to a assorted vendor
c)When a industry will increase the dimensions and scale of its operations
3) Which methodology of boost will enable a industry to protect its hold values? (2 Marks)
a)Interior (organic)
b)Merger
c)Acquisition
4)Which is a technique of inner (organic) boost? (2 Marks)
a)Acquisition
b)Merger
c)Franchising
5)What would you set apart a question to if more money is leaving a industry than coming into it? (2 Marks)
a)A surplus closing balance.
b)Sales can be seen to receive higher.
c)A closing balance exhibiting a deficit.
RATIO FORMULA
| Profitability Ratios | Profitability Ratios |
|---|---|
| Spoiled profit margin | Spoiled profit x 100 |
| Income | |
| Operating profit margin | Operating profit x 100 |
| Income | |
| Return on fairness | Web profit x 100 |
| Entire fairness | |
| Return on Capital Employed | Income from operations __________ x 100 |
| Entire fairness + Non-contemporary liabilities | |
| Liquidity Ratios | Liquidity Ratios |
| Contemporary Ratio | Contemporary resources |
| Contemporary liabilities | |
| Rapidly ratio/Acid take a look at | Contemporary resources – stock |
| Contemporary liabilities | |
| Cash Ratio | Cash and money equivalents |
| Contemporary liabilities | |
| Efficiency | Efficiency |
| Stock defending length | Inventories x 365 |
| Cost of gross sales | |
| Receivables collection length | Receivables x 365 |
| Income | |
| Payables fee length | Payable x 365 |
| Cost of gross sales |
| Years | 5% | 6% | 7% | 8% | 9% | 10% |
|---|---|---|---|---|---|---|
| 1 | 0.9524 | 0.9434 | 0.9346 | 0.9259 | 0.9174 | 0.9091 |
| 2 | 0.9070 | 0.8900 | 0.8734 | 0.8573 | 0.8417 | 0.8264 |
| 3 | 0.8638 | 0.8396 | 0.8163 | 0.7938 | 0.7722 | 0.7513 |
| 4 | 0.8227 | 0.7921 | 0.7629 | 0.7350 | 0.7084 | 0.6830 |
| 5 | 0.7835 | 0.7473 | 0.7130 | 0.6806 | 0.6499 | 0.6209 |
| 6 | 0.7462 | 0.7050 | 0.6663 | 0.6302 | 0.5963 | 0.5645 |
| 7 | 0.7107 | 0.6651 | 0.6227 | 0.5835 | 0.5470 | 0.5132 |
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