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3 marksCapital Budgeting and Investment Appraisal

CAPE Accounting Unit 2 · 2019 · Paper 2 · Question 3(d)(i)

Unique Design is evaluating two investment opportunities (Project A and Project B) with a cost of capital of 8%.

Distinguish among the THREE given methods for evaluating investment decisions.

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Other parts of this question

  1. 3(a)(i)Calculate the breakeven in units.[4 marks]
  2. 3(a)(ii)Calculate the margin of safety.[2 marks]
  3. 3(a)(iii)Calculate the number of units that must be sold if the company wants to make a total profit of $4 306 500 for the quarter.[4 marks]
  4. 3(b)(i)Calculate the direct material price variance.[2 marks]
  5. 3(b)(ii)Calculate the direct material quantity variance.[2 marks]
  6. 3(b)(iii)Calculate the direct labour rate variance.[2 marks]
  7. 3(b)(iv)Calculate the direct labour efficiency variance.[2 marks]
  8. 3(c)(i)Explain the term 'ideal standard'.[3 marks]
  9. 3(c)(ii)Explain the term 'practical standard'.[3 marks]
  10. 3(d)(ii)Calculate the payback period for Project A.[2 marks]
  11. 3(d)(iii)Calculate the NPV for Project B.[4 marks]
  12. 3(d)(iv)Suggest, using the NPV criterion, which project should be recommended to Unique Design, giving ONE reason.[2 marks]

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