Ca-final sfm classes by dr. rajesh kumar v

Dear Dr. Rajesth Kumar 

I am a chartered accountant serving as faculty at Dayananda sagar college.  

I request you to kindly provide answers to the following questions at the earliest.  

Problems requiring solutions :

1. In organic Chemicals limited is about to replace its old boiler equipment, either by coal fired system or by an oil fired system. Finance costs 15% a year , and other estimated costs are as follows :

If the company expected the new boiler at last fifteen years, which system should be chosen ?

1. Sportech ceramics ltd, is about to replace its rapidly deteriorating boiler equipment .  Three types of boiler system are being considered as a suitable replacement :

1. Coal fired  b. Gas fired c. oil fired

The associated costs are as follows :

The new boiler is expected to last at least 10 years .  the company has an opportunity cost of finance of 15% per year.  Which system should be chosen?

1. Indo –gulf fertilizers Ltd supports the concept of terotechnology or life cycle costing for new investment decisions covering its engineering activities.  The finalized of this philosophy  is now well established and its principles extended to all other areas of decision making.

The company is to replace a number of its machines and the production manager is to run between the  X machine , a more expensive machine  with a life of 12 years, and the  W machine with an estimated life of 6 years .  if the W machine is chosen it is likely that it would be replaced at the end of 6 years by another W machine.  The pattern of maintenance and running costs differs between the two types of machine and relevant data are shown below:

You are required to recommend with supporting figures , which machine to purchase , stating any assumptions made.

1. A house wife is looking at ways of producing domestic hot water and  considers two possibilities –  an electric immersion heater having an installation cost of Rs. 160 and estimated annual electrical charges of Rs. 200 and a gas boiler with an installation cost of Rs. 760 with annual fuel bills of Rs. 80. 

Assuming yourself as a consultant to this cost –conscious –house wife . advise her suitably by comparing  two systems. On the basis of 1. Total expenditure, and 2. Present value over a five years  period . Take interest at 9%

What will be your recommendation if you consider both the equipments for a 8 year period ?

1. A company is considering a cost saving project.  This involve purchasing a machine costing “Rs. 7000, which will result in annual saving on wage  costing of Rs. 1000 and on material costs of Rs. 400. 

The following forecasts are made of the rates of inflation each lyear for the next 5 years:

Wages costs 10%

Material costs 5%

General prices 6%

The cost of capital of the company , in monetary terms is 15%

Evaluate the project, assuming that the machine has a life of 5 years and no scrap value.

1. S Engineering company is considering to replace or repair a particular machine, which has just broken down.  Last year, this machine coasted Rs. 20,000 to run and maintain. A further useful life of 5 years is expected , if immediate repairs of Rs. 19000 are carried out.  If the machine is not repaired, it can be sold immediately to realize about Rs. 5000 ( ignore loss/gain on such disposal)

Alternatively the company can buy a new machinery for Rs. 49,000 with an expected life of 10 years with no salvage value after providing depreciation on straight line basis.  In this case, running and maintenance costs will reduce to Rs. 14,000 each year

The company considers a normal return of 10% per annum after tax for a minimum requirement on any new investment.  Which alternative will you choose ? assume straight line method of depreciation is acceptable for income tax purposes also.  Take corporate tax rate as 35%.

1. From the following information in respect of Alpha Ltd calculate the total value of human capital by following Lev and Schwartz model :