2. Samreen Ltd is considering an investment in one of the two mutually exclusive proposals – Projects p1 and p2 , which require cash outlays of Rs.3,40,000 and Rs. 3,30,000 respectively. The certainty equivalent (C.E.) approach is used in incorporating risk in capital budgeting decisions. The current yield on government bond is 8% and this be used as the risk less rate. The expected net cash flows and their certainty equivalents are as follows:





Project P1 Project P2
Year-end Cash Flow C.E. Cash Flow C.E.
1 180000 .6 180000 .8
2 200000 .8 180000 .7
3 200000 .7 200000 .8

Present Value factor os Rs. 1.00 discounted at 8% at ehe end of the year 1,2,3 are .926, .857 and .794 respectively. You are required to find out:-
I. Which project should be accepted?
II. If risk adjusted discount rate method is used, which project would be analysed with a higher rate?


please send your answers to psrinivas1@in.com

1. A company is considering the replacement of its existing machine which is obsolete and unable to meet the rising demand for its product. The company is faced with two alternatives: to buy Machine A which is similar to the existing machine or to go in for Machine B which is more expensive and has much greater capacity. The cash flows at the present level of operations under the two alternatives are as follows:-


Machine Immediate Cash outflows Cash inflows (in lakhs of Rs.) at the end of
(in lakhs of Rs.) 1st IInd IIIrd Ivth Vth
year year year year year
Machine A 25 - 5 20 14 14
Machine B 40 10 14 16 17 15

The company’s cost of capital is 10%

The finance manager tries to appraise the machines by calculating the following :
1. Net Present Value
2. Profitability Index
3. Payback period; and
4. Discounted payback period

At the end of his calculations, however, the finance manager is unable to make up his mind as to which machine to recommend.

You are required to make these calculations and in the light thereof to advise the finance manager about the proposed investment.

Note: Present values of Re.1 at 10% discount rate are as follows:

Year 0 1 2 3 4 5
P.V. 1.00 .91 .83 .75 .68 .62

What is the difference between PP expenses and Deffered revenue expenditure

suppose that 4 kgs of material A are required to make one unit of product TS, each kilogram costing Rs.10. It takes direct labour 5 hours to make one unit of product TS. The labour force is paid Rs.4.50 per hour.

During the period the following results were recorded.
Material A: 8,200 kgs purchased on credit* Rs.95000
Material A: kgs issued to production* 8200 kgs
Units of product TS produced* 1600
Direct labour hours worked* 10000
Cost of direct labour* Rs.32000

Required:
(a) Calculate the following variances for the period.
· Material price variance
· Material usage variance
· Labour rate variance
· Labour efficiency variance
(b) Prepare journal entries for the transactions marked * above, together with the variances calculated in (a).

You should make the following assumptions
· An integrated accounting system is maintained
· There are no opening or closing stocks of work in progress.
Please mail the solution to psrinivas1 @ in.com

Dear All
Please share any information related to Project Financing & Control. PLease share material or suggest best books for this. Is there any specific course for this.

Regards
Pawan Agrawal
agarwal.pawan@rediffmail.com

Whether exchange gain/loss on import of fixed asset would be capitalized (As per company law) or transferred to profit & loss account (As per AS - 10)

A Public ltd. co. has issued 9% Non-Cum, optionally convertible Pref. shares, which is redeemable at 15% premium after 10 years.

The co.has started commercial production in 2007-08,so there is no profit in current year & no balance of accumulated reserves.

In the current year (2007-08), what will be accounting treatment in respect of Premium on remption of pref. shares.

Whether travelling expenses, hotel expenses & other expenses incurred in foreign currency will be recorded at the rate of purchase of foreign currency or will be recorded on the date of transaction. Consequently how the effect of foreign exchange gain/loss will be recorded

Dear All,

I would like to know whether we need to maintain ledger of the Subsidiary in our Indian Accounting records provided the subsidiary is treated as cost centre.

How the section 212 of Companies Act applies in this case?

If Earlier the subsidiary is profit centre but now it is cost centre.

Hi ...
Can any one give information about - Information Assets:
1.What are those.
2.Existence of Information aseets in India?
3.Valuation Of Information Assets?
4. Any standards applicable>
5.From where can i know more about Information Assets.