QUESTION 1
Zheng deposited money into three different accounts, as follows:
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Account A
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Account B
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Account C
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Sum invested
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£80,000
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£140,000
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?
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Type of interest
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Simple interest
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Compound interest
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Compound interest
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Rate of interest
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4.5%
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4.2%
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?
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per annum
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Time invested (years)
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?
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5
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6
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Interest earned
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£18,000
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?
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£23,610.35
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Final amount
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?
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?
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£115,110.35
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(Principle + Interest)
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QUESTION 2
Chelsey bought £75,000 (nominal value) of 3¾% debenture stock with each £100 (nominal value) of stock costing £90.
(a) Calculate the amount paid for the stock.
She held the stock for 3 years.
(b) Calculate
(i) the total interest earned
(ii) the total percentage yield on amount invested.
Chelsey purchased 15,000 5¼% preference shares and received £1,260 dividend in the first year.
(c) Calculate the nominal value of one share.
She received the same dividend in the second year. She then sold the shares for £122,100 and calculated that this was exactly 10% more than she paid for them.
(d) Calculate the purchase price of one share.
(e) Calculate the percentage profit per annum, based on purchase, sale and dividends.
QUESTION 3
An industrial product may be manufactured by two methods of production.
Using Method X, fixed costs are £1,750,000 per period and variable costs are £295 per unit of product.
Using Method Y, fixed costs are £1,050,000 per period and variable costs are £335 per unit of product.
The manufacturer plans to sell the product at £435 per unit.
(a) Calculate:
(i) the level of output per period for which the total costs are the same
(ii) the break even point in units per period for method X
(iii) the total cost per period at break even for method Y.
The manufacturer predicts sales of 20,000 units per period.
(b) State which method should be used.
(c) Calculate the expected profit per period using this method.
QUESTION 4
Part of the Balance Sheet of Retailer A at the end of the first year of trading is shown below:
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Balance Sheet as at 31 December Year 1
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£
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£
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£
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Fixed Assets
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Figure omitted
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Current Assets
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stock
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8,899
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debtors
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9,330
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bank
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2,420
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cash
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385
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21,034
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Amounts due within 12 months
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trade creditors
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8,090
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Net current assets
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12,944
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251,134
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Amount due after 12 months
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mortgage on premises
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(88,300)
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162,834
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a) Using the above figures from the Balance Sheet, calculate:
(i) Current ratio
(ii) Borrowing ratio (capital gearing ratio)
(iii) Fixed assets.
(b) During 2008 the following information relates to Retailer B.
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£
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Net sales
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500,000
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Cost of goods sold
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377,700
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Initial stock value
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15,500
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Final stock value
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18,500
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Overhead expenses
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69,900
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Calculate:
(i) gross profit
(ii) net purchases
(iii) the rate of stock turnover (stockturn) per annum.
QUESTION 5
Ashok calculates the expected average rate of return of investment project X as 28%, using the formula:
(Average revenue return per annum net of repair and maintenance costs)/ (Initial cost of Project)
He uses estimated figures as follows:
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Initial cost of the project
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£850,000
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Average cost of repairs and maintenance per annum
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£50,000
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Life of the project
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5 years
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He further estimates that the revenue return before deducting the cost of repairs and maintenance will be £300,000 for each of the first 4 years.
(a) Using Ashok’s formula, calculate the average revenue return per annum net of repair and maintenance costs, and hence find the estimated revenue return before deducting the cost of repairs and maintenance for year 5.
(b) Bettany estimates the net present value of investment project Y at two discount rates, with the following results
Discount rate 10% Net present value = £19,000
Discount rate 13% Net present value = £4,000
(i) Use these figures to calculate the internal rate of return
(ii) Given that the investor requires the project to earn at least 13.5% per annum, advise the investor whether to proceed with the investment.
QUESTION 6
A bankrupt trader owed a total of £87,600, of which £35,500 is secured against the trader’s assets and the rest is unsecured.
The assets of the business realised £66,760.
(a) Express the assets as a percentage of the liabilities.
(b) Calculate how much in the £ will be paid to the unsecured creditors. State the units of your answer clearly.
The trader owed Dinara £17,000, of which 25% is secured against assets.
(c) Calculate how much Dinara received.
QUESTION 7
Machine M has an initial cost of £180,000 and is depreciated by the equal instalment method, at the rate of £25,000 per year until the book value is less than £25,000.
(a) Prepare a depreciation schedule for the first 3 years that shows, for each year, the yearly depreciation, the accumulated depreciation and the book value at the end of the year.
(b) Calculate the anticipated life of the machine in a whole number of years, and the residual value at the end of that period.
Machine N is depreciated by the diminishing balance method. It has an initial cost of £250,000 and a book value after one year of £190,000.
(c) Calculate
(i) the rate of depreciation
(ii) the book value after 2 years
(iii) the amount of depreciation expected during year 3.
QUESTION 8
A company sold 540 spectroscopes in year 2007 and 756 spectroscopes in year 2008.
(a) Calculate the quantity relative for year 2008 with 2007 as the base year.
The price of the spectroscopes fell by 12.5% from year 2006 to year 2007.
(b) Express this change as a price relative.
In year 2008 the company cut the price of its spectroscopes by 10% of the year 2007 price.
(c) Calculate the index of prices for the years 2006 to 2008
(i) as a chain base index
(ii) with the prices for 2007 and 2008 based on 2006 as 100.
(d) Calculate the percentage increase in receipts from sales of spectroscopes from 2007 to 2008.