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4 marksCapital Budgeting and Investment Appraisal

CAPE Accounting Unit 2 · 2021 · Paper 2 · Question 3(d)(ii)

Hobbs Ltd is considering purchasing new machines costing $700,000 with a 10-year useful life and zero salvage value, using a 12% discount rate. Expected annual cash flows and present value factors are provided.

Determine the discounted payback period.

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Other parts of this question

  1. 3(a)(i)Define the term 'standard costing'.[2 marks]
  2. 3(a)(ii)Outline the THREE steps in the process of establishing direct materials standards.[6 marks]
  3. 3(b)Discuss the following statement in relation to the use of budgets in an organization: "A budget assists managers in managing and controlling the activities for…[5 marks]
  4. 3(c)Prepare a purchases budget for the three months ending April 2021. (Use kg for the unit of the products.)[11 marks]
  5. 3(d)(i)Calculate the net present value of the machine purchase.[7 marks]

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