Business Finance (3 Viewers)

[SoCal]

To answer your first question, Expand Ltd has net operating expenses of $132m including depreciation of $22m, so its cash operating expenses are $110m. Now if the company goes ahead with the new product line "the marketing manager still believes the new product range will compete with and reduce existing sales volumes by 10%". Now because 100% of sales must contribute toward 100% of operating expenses, 10% of sales must contribute 10% of operating expenses (or $11m). Therefore, the new product range will reduce cash operating expenses by $11m.

To answer your second question, $15m of raw material stock is purchased each year but the first $15m is purchased immediately and is included in the initial $250m outlay. So then you have $15m cash outlay for raw materials stock at the end of the fist year and again at the end of the second, third and fourth year but not at the end of the fifth year because the machinery is expected to last for only five years. However, he just included the $15m in raw material stock purchases for five years as part of the (-$24m + $11m -$18) = -$31m per year calculation for simplicity. So because there is no $15m cash outlay for raw materials stock at the end of the fifth year, you have to add this back on.

I hope that explains everything. I tried to explain it as clearly as I could but if I am not making any sense just ask again. For what it is worth, I think that he didn't really explain himself very well in a few parts.

 

[baker182]

To answer your first question, Expand Ltd has net operating expenses of $132m including depreciation of $22m, so its cash operating expenses are $110m. Now if the company goes ahead with the new product line "the marketing manager still believes the new product range will compete with and reduce existing sales volumes by 10%". Now because 100% of sales must contribute toward 100% of operating expenses, 10% of sales must contribute 10% of operating expenses (or $11m). Therefore, the new product range will reduce cash operating expenses by $11m.

To answer your second question, $15m of raw material stock is purchased each year but the first $15m is purchased immediately and is included in the initial $250m outlay. So then you have $15m cash outlay for raw materials stock at the end of the fist year and again at the end of the second, third and fourth year but not at the end of the fifth year because the machinery is expected to last for only five years. However, he just included the $15m in raw material stock purchases for five years as part of the (-$24m + $11m -$18) = -$31m per year calculation for simplicity. So because there is no $15m cash outlay for raw materials stock at the end of the fifth year, you have to add this back on.

I hope that explains everything. I tried to explain it as clearly as I could but if I am not making any sense just ask again. For what it is worth, I think that he didn't really explain himself very well in a few parts.

Your the man, I fully understood it all. Yeah I know, he did'nt really go through the question that much, he only really gave us the answer. You should replace him as the tutor/lecturer hehee

 

[SoCal]

The actual question wasn't worded very well either. Some parts were a bit confusing, for example the $15m of raw material stock.

 

[PrincessSJ]

sounds like really smart shit... good luck!

 

[baker182]

Be at your workshops in week 9, for one of Neil's famous 10 minutes spot test.

A friend of mine is going overseas for 2 weeks, and Neil told her that she will miss the spot test in week 9.

 

[SoCal]

Haha, baker182 with his inside information once again! So will he give her a chance to make it back up? It is pretty harsh if he doesn't.

P.S. Is your screen name supposed to be barker182 instead of baker182?

 

[baker182]

Haha, baker182 with his inside information once again! So will he give her a chance to make it back up? It is pretty harsh if he doesn't.

P.S. Is your screen name supposed to be barker182 instead of baker182?

Nah, baker, I notice you saw the Paul Barker on the roll list hey

No, she will miss out, also she will miss the mid-semester exam and her 20% will be carried to the final exam.

 

[SoCal]

Nah, baker, I notice you saw the Paul Barker on the roll list hey

What roll list? I just thought it was supposed to be barker182 because Travis Barker is the name of the drummer from Blink-182.

No, she will miss out, also she will miss the mid-semester exam and her 20% will be carried to the final exam.

That is harsh. Missing out on the mid-semester exam is not so bad because you can make that 20% back up in the final exam.

 

[baker182]

What roll list? I just thought it was supposed to be barker182 because Travis Barker is the name of the drummer from Blink-182.

For the workshop, you know the list that goes around, there is a Paul Barker on there. Well the 182 part is from Blink 182 and my last name is Baker.

 

[SoCal]

Oh yeah, I know the one you are talking about. I don't pay attention to the names on there though!

 

[SoCal]

OK, I am trying to do some last minute cramming for Business Finance and Money and Banking and I have a question that some of you might know the answer to. For Week 3 Workshop Questions 1. (a) the answer he gave was was:

P = $100 + $100/.0609 [1- (1/1.0609^15)]

Now the question asks to find P of a semi-annual $100 annuity due that is expected to recur over the next 8 years. So I would have thought you would have one payment immediately, one at the end of six months, anther at the end of the year, etc, until the final payment at the end of the 8th year, making a total of 16 payment after the first $100 that is payed immediately. Therefore "n" should equal 16 not 15. Am I missing something?

 

[em_516]

i don't think you pay up front..but at the same time, i'm really not sure what i'm talking about

 

[SoCal]

You definitely make your first payment immediately, that is what annuity due means.

 

[baker182]

OK, I am trying to do some last minute cramming for Business Finance and Money and Banking and I have a question that some of you might know the answer to. For Week 3 Workshop Questions 1. (a) the answer he gave was was:

P = $100 + $100/.0609 [1- (1/1.0609^15)]

Now the question asks to find P of a semi-annual $100 annuity due that is expected to recur over the next 8 years. So I would have thought you would have one payment immediately, one at the end of six months, anther at the end of the year, etc, until the final payment at the end of the 8th year, making a total of 16 payment after the first $100 that is payed immediately. Therefore "n" should equal 16 not 15. Am I missing something?

For the annuity due, the formulae is as follows

P= C + C/i (1 - 1/(1 + i)^n-1)

You been promised 16 payments, with the first being due immediately. Thus you have been promised $100 today, plus an ordinary ammunity of 15 payments. This is shown in the equation with n set equal to 16. So we have 16-1= 15.

 

[baker182]

You know on the Business Finance, sample paper. how the fuck, to work out the answer to question 10.

 

[baker182]

for those for had trouble with question 10 on the sample paper. I just worked out how to do the question. Here are my workings:

Cost = $10,000
dep for tax = $2,000 pa.
If after 4 years, its sold.
book value after 4 years = $10,000 -(4 * $2,000) = $2,000
salvage value = $5,000
tax on gain = $2,000 - $5,000 = - $3,000
Tax = 0.36 * $3,000 = $1,080

Therefore, $5,000 - $1,080 = $3,920
answer is b.

I'am so going to fail this test heheeh

 

[em_516]

You definitely make your first payment immediately, that is what annuity due means.

haha sorry..i barely read the question

 

[SoCal]

For the annuity due, the formulae is as follows

P= C + C/i (1 - 1/(1 + i)^n-1)

You been promised 16 payments, with the first being due immediately. Thus you have been promised $100 today, plus an ordinary ammunity of 15 payments. This is shown in the equation with n set equal to 16. So we have 16-1= 15.

The thing is you will actually be receiving 17 payments, the first immediately and then 16 more over the course of the next 8 years.

You know on the Business Finance, sample paper. how the fuck, to work out the answer to question 10.

I am too lazy to do practise exams. I see you found the answer anyway.

 

[baker182]

The thing is you will actually be receiving 17 payments, the first immediately and then 16 more over the course of the next 8 years.

But you recieve your first payment now, so you dont need to discount that value. You need to discount the other 16 payments. But with the n-1 in the forumlea, it becomes 15 payments.

 

[SoCal]

I have another question for you. For Week 3 Supplementary Question 4. (c) he changed the 0.4% p.f. interest rate to its effective half-yearly effective rate by:

i(l) = (1 + i(s))^m - 1
i(l) = 1.004^13 - 1

Shouldn't 1.004 be raised to the power of 12 and not 13?