ACCA/CAT

Notes:

As the investment in working capital is based on the expected sales revenue this has to be calculated first. Please note how the price per unit was given in first-year terms and hence that figure has been used for Year 1. In the following years the forecast inflation has been included. You should note the cumulative nature of inflation. The working capital need is simply calculated as the stated % of sales revenue. When calculating the working capital cash flows it is the change in the working capital need which is the cash flow. Hence for Year 1 the need is 13.2 and as nothing has previously been invested the cash flow is an outflow of 13.2. In Year 2 the need has risen to 13.6 but as 13.2 has already been invested the cash flow is just an outflow of 0.4 – the increase in the need. In Years 3 and 4 the need decreases and hence

cash inflows arise. As the working capital is required at the start of each year the cash flow for Year 1 will occur at T0 and the cash flow for Year 2 will occur at T1, etc. Finally at the end of the project any remaining investment in working capital is no longer required and generates a further cash inflow at T4. The sum of the working capital cash flow column should total zero as anything invested is finally released and turns back into cash.

Other potential workings:

A working could be shown for the variable and fixed costs. However, this can be time consuming and enough detail can often be shown on the face of the cash flow table to show your marker what your thought

process has been. The $12,000 of initial research cost is ignored as it has already been spent. Hence it is a sunk cost and is not relevant to the analysis of the future project.

The cash flow table

It is estimated that the project has a positive NPV of $88,300 and hence it should be accepted as it will add to shareholder wealth.

Notes:

1 A cash flow table should always be started on a new page as it will then hopefully fit on the one page. This avoids the need to transfer data over a page break which inevitably leads to errors. As tax is paid one year in arrears the cash flow table is taken to T5 even though it is only a four-year project. A cash flow table should be split into a ‘Revenue’ section and a ‘Capital’ section. In the ‘Revenue’ section all the taxable revenues and tax allowable costs are shown. In the ‘Capital’ section all the cash flows relating to the asset purchase and other cash flows which have no impact on tax are shown. Students should ensure that they put brackets around negative cash flows as otherwise negative items may be treated as if they are positive when the cash flows are totalled. 2 The annual sales revenue figures are brought forward from Working 3. Note the normal assumption that the revenue for a year arises at the end of the year – hence the revenue for Year 1 is shown at T1. This assumption also applies to the variable and fixed costs.

3 The variable costs for each year are based on the sales units for the year, the price per unit and the inflation rate for costs. Note that as the cost was given in current terms, which is as at T0 and the first

costs are recorded at T1, the inflation has to be accounted for immediately. You should contrast this with the inflation of the sales revenue in Working 3.

4 The fixed costs are relevant as they are said to be incremental. The cost per unit for the first year has been given and this is multiplied by the forecast sales in Year 1 to give the total incremental fixed costs. Like the variable costs the cost per unit was given in current terms and hence inflation must be accounted for immediately. From Year 1 onwards the fixed costs have continued to be inflated by the relevant inflation rate of 5%. You must remember that fixed costs are fixed and do not change as the activity level changes. In this way you will avoid the common error which is to treat the fixed costs as though they were variable.

5 The tax is calculated at 30% of the net revenue cash flows. As tax is paid one year in arrears the tax for Year 1 which is calculated at the end of Year 1 (T1) will become a cash flow at T2. This pattern continues in the following years.

6 The tax savings on the WDAs are brought forward from Working 2.

Please be careful to show them in the correct column given their respective timings. Also please remember that these are the ‘good news of tax’ and so are cash inflows.

7 The residual value was given in money terms and hence already reflects the impact of inflation. Had the value been given in current terms and no specific inflation rate was indicated then the logical approach would be to inflate at the general inflation rate. The normal assumption is that the asset is disposed of on the last day of the last year of the project and hence the cash inflow is shown at T4.

8 The working capital cash flows are brought forward from Working 3. They are shown in the ‘Capital’ section as they do not have any tax impact. If they were put in the ‘Revenue’ section they would change the net revenue cash flows and this would impact on the tax calculated which would be incorrect.

9 The discount factors are found in the tables provided. The 12% rate is the suitable money cost of capital calculated in Working 1.

10 The present values are found by multiplying the total net money cash flows by the discount factors shown.

11 The NPV is simply the sum of the present values calculated. You should always comment on what the NPV calculated is indicating about the viability of the project.

As indicated previously this is a very comprehensive example which includes all the major potential problems you could face. I would not expect any exam question to be as complex but all the problems shown

in this example have been examined in the past and will I am sure be examined again in the future. Those most able to deal with these issues will be those who are most successful in the exam.

相关推荐：

2013年ACCA/CAT辅导资料汇总

更多关注：考试介绍 考试动态 考试用书 免费短信提醒>>

（责任编辑：中大编辑）

共3页,当前第2页  第一页  前一页  下一页