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NATIONAL UNIVERSITY OF SCIENCE AND TECHNOLOGY

DEPARTMENT OF COMPUTER SCIENCE

BACHELOR OF ENGINEERING HONOURS DEGREE IN

CIVIL AND WATER ENGINEERING

CIVIL ENGINEERING BUSINESS II

INDIVIDUAL ASSIGNMENT

DUE DATE: 2015

INSTRUCTIONS: Answer Questions: 1, 2, 4, and 6.

QUESTION 1

A company has to choose between two projects both of which involve an investment of
20 000. The current cost of capital is 10%. The net cash inflows of the projects are:
______________________________________________________
Year Project S Project T
$ $
1 7 000 14 000
2 7 000 8 000
3 7 000 2 000
4 7 000 2 000
______________________________________________________

Required:

a) For each Project calculate the following:

i) Payback Period . (2 marks)


ii) Discounted Payback Period .. (5 marks)
iii) Net Present value (NPV).... (3 marks)
iv) Profitability Index (P.I.) (2 marks)
v) Internal Rate of Return (IRR) . .. (5 marks)
vi) Modified Internal Rate of Return (5 marks)

b) Explain three disadvantage of the Simple Payback period method (3 marks)


QUESTION 2

Given below are details of some of the budgets of S Ltd for the eight months ending
30 June 2015:
Month Sales in Units Wages Overhead Expenses
$000 $000
November 2014 8 500 200 90
December 2014 9 000 230 100
January 2015 10 500 260 110
February 2015 11 000 270 120
March 20105 10 500 250 110
April 2015 10 000 230 100
May 2015 9 000 210 90
June 2015 9 500 240 100

Notes:
1. Units are purchased at a standard cost of $60 each. Purchases are planned so that at the
end of each month the stock is sufficient to meet the forecast sales target for the following
two months.
2. All sales are made at a price of $100 per unit. One half of the sales are made for
immediate cash settlement and attract a discount of 5%. The remainder of the sales are on
one months credit.
3. All purchases of units are made on one months credit.
4. Wages and overhead expenses are paid as incurred. From 1 February 2015 a wage rise of
10% has been agreed. This pay rise was agreed only after the budgets had been prepared
and is not allowed for in the figure given above.
5. The company is repaying a bank loan at the rate of $22 000 a month and interest on the
loan to be paid in December 2014 and June 2015 is expected to be $30 000 and $28 000
respectively. Interest on bank overdraft due in June 2015 is established to be $4 000.
6. In March 2015 $30 000 will be paid as a 15% deposit on a new machine. In June 2015
when the machine is expected to be installed and in full production the balance due will
be paid.
7. Tax of $100 000 has to be paid by the company on 1 June 2015.
8. It had been estimated that the stock at 1 January 2015 would be 15 500 units and that at
1 March 2015 the cash at the bank would be $20 000.

Required:
a) The Purchases budget in units for the six months from January June 2015.

(6 marks
b) The Cash budget for the four months of January, February, March and April 2015
(13 marks)
QUESTION 3

The following information illustrates the final accounts for internal use of GM Ltd for the
year ended 31December 2014:

GM Ltd, Trial Balance as at 31 December 2014 .


$000 $000
Premises 1 800
Equipment, Machinery 650

Motor vehicles 450


Investments 600
Provision for depreciation:
Premises 20
Equipment, Machinery 140
Motor vehicles 110
Debtors, Creditors 280 50
Bank and cash balances 330
Prepayments, Accruals 5 10
Bank loan (10 years) 123
Issued and paid-up capital:
Ordinary shares 1 000
8% Preference shares 1 000
Share premium account 100
Profit and loss balance (1/1/2014) 5
Purchases, Sales 1 200 3 500
Stock (1/1/2014) 85
Sales and distribution costs:
Sales salaries 85
Warehouse costs 150
Advertising, Publicity 250
Motor expenses 150
Administration expenses:
Office salaries 80
General overheads 255
Rates, Insurance 15
Light, Heat 11
Telephone 12
Interest paid 60
Dividends received 10
Reserves 400
6 468 6 468

Other information as on 31 December 2014:

1. Stock valued at $65 000.


2. Depreciation charges for the year:
i) Equipment, Machinery $230 000.
ii) Motor vehicles $300 000

3. Accrued Motor expenses were $6 000 and prepaid insurance amounted to $ 4000.

3. The board of directors recommended that the preference shareholders be paid


their dividend and that 10% should be provided for ordinary share dividends.

4. A sum of $200 000 is to be set aside for corporation tax and $300 000 is to be
transferred to reserves.

Required:

Prepare the following Statements for GM Ltd, for the year ending 31 December 2014:

a) A Statement of Comprehensive Income (11 marks)

c) A Statement of Changes in Equity (4 marks)

b) A Statement of Financial Position (10 marks)

QUESTION 4

a) Explain the following as used in Zimbabwean Law:

i) Vicarious Liability (6 marks)

ii) Ultra Vires Doctrine (6 marks)

b) Under what circumstances would an employer be held liable to third parties for the
delicts by his employee? You may give examples. (13 marks)
QUESTION 5

After a market research, Fumane Ltd has established the following expectations about the
rates of return for two assets, Asset A and Asset B:

Annual Rates of Return


Economy Probability Asset A Asset B

Poor 0.20 10% 24%


Average 0.60 18 19
Good 0.20 26 14

a) Calculate the following for each asset:

i) Expected return (3 marks)


ii) Variance (6 marks)
iii) Standard deviation (2 marks)

b) What is the Covariance and Correlation coefficient of the returns of the two assets.
(5 marks)
c) If Portfolio AB is formed by investing 40% in Asset A and 60% in Asset B,
calculate the following for this portfolio:

i) Expected return (2 marks)


ii) Variance (4 marks)
iii) Standard deviation (1 marks)

d) How does the risk of Portfolio AB compare with the risks of each of the two
assets? (2 marks)

QUESTION 6

Explain the information needs of each of the following accounting information users:

a) Government , (5 marks)
b) Shareholders, (5 marks)
c) Competitors (5 marks)
d) Employees; (5 marks)
e) Customers. (5 marks)