A company intends to invest in a new painting hall. There are two complete investment options, Alt A and alt B. These two options are listed below: Alt A 2600 Alt B 1800 Basic investment Payment surplus year 1 Payment surplus year 2 Payment surplus year 3 Payment surplus year 4 Payment surplus year 5 Payment surplus year 6 Payment surplus year 7 Payment surplus year 8 470 470 470 470 470 470 470 470 410 410 410 410 410 410 Residual value after year 6 Residual value after year 8 60 All amounts in thousands of kronor! Option A has a lifespan of 8 years and Option B of 6 years. The discount rate is 8%. Show three relevant ways to compare investments. Write these clearly under points 1, 2 and 3. Calculate and explain why you used each calculation method! Choose options and motivate!

Q: Explain the importance of the break - even EBIT.

A: A break-even point is the point of sales at which the operating income or the earnings before…

Q: Explain breakeven analysis.

A:

Q: Going beyond just calculating NPV, discuss it qualitatively. What is it used for? Is it a good…

A: Net present value is defined as the difference between the PV of the cash inflows as well as present…

Q: WHAT DOES BREAK-EVEN ANALYSIS EXPLAIN?

A: Break Even - Break even is the level of sales wherein the total cost = Total revenue, in simple…

Q: What are some of the advantages of a multi-step approach?

A: An extensive examination of a company's costs and net income is provided by a multi-step income…

Q: Why the limitation of portfilio analysis is itsuggests the use of standard strategies that can miss…

A: A portfolio is a collection of various investments. Portfolios are a vital part of a corporation…

Q: important to have an FMS option

A: FMS Stock Options refers to all outstanding options to buy stocks of FMS Common Stock bestowed under…

Q: What can be understood by abnormal return?

A: Note firstly we understand what is meaning of abnormal return. Basic meaning of abnormal return is…

Q: So how would we find basic EPS?

A: Basic EPS is calculated by dividing the earnings available to common stockholders by the weighted…

Q: Explain what is risk decompositon

A: Risk is referred as the future uncertainty with reference to the deviation from an expected earnings…

Q: Why do we need stress testing and scenario analysis?

A: A stress test or scenario analysis is used to determine and analysis the outcome of a financial…

Q: Des the  Initial project screening by the payback method reduce the information search? How?

A: It refers to the time period that is required to get an amount invested in a project with some…

Q: What are the ramifications of doing a CVP analysis

A: It   is about the ramifications of doing a CVP analysis:

Q: why the Bretton Woods System collapse

A: Bretton Woods System: At the end of the Second World War, leaders of 44 nations met for a conference…

Q: Working out is not right, can you try again

A: Given,Face value (nominal value) = £100Issue price = £115Coupon rate = 6.6% p.a.Redemption value =…

Q: What is modified breakeven analysis?

A: Break even analysis refers to the financial computation that weights the new business cost, product…

Q: 1. Which entry strategy has the least risk and why?

A: When a company is looking to enter a new market especially a new foreign market (i.e. a market in…

Q: Describe the fundamentals of Replacement-Analysis?

A: Replacement analysis is the process where it is determined whether it would be beneficial to replace…

Q: What are the Replacement-Analysis Fundamentals?

A: Replacement analysis refers to the process where an organization determines whether it is beneficial…

Q: What are valid weaknesses of NPO?

A: Not for profit organization have certain weaknesses. some for them are- 1. Limited Purposes In order…

Q: Explain the relationship between WACC and EVA! demonstrate by providing a complete analysis and…

A: Formula: EVA = Net Operating profit margin(NOPAT) -(Capital employed* WACC)

Q: In developing new system, it is important to analyse the existing system which is currently used.…

A: A system is a mechanism in which different components are interconnected such as; procedures,…

Q: How to find diluted EPS?

A: When calculating diluted earnings per share (EPS), the possibility of dilution due to conversion of…

Q: Explain relevant risk

A: Introduction: Risk can be characterised in terms of the uncertainty of future consequences resulting…

Q: What differential analysis and why would we use it?

A: Decision making is the process of taking the decisions based on the costs and different kind of…

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.