Question 1 Your business partner is interested in property investment and has been looking at properties in the Gauteng area for the last couple of years. During 2022 he invested in buildings in the Gauteng area. He intends to use these buildings as shared office space for business travellers who travel weekly between Johannesburg and their coastal residential homes. The buildings require renovations. The total cost of the renovations is R80 000 000. The renovations will be completed by 31 December 2022. The expenditure will occur evenly throughout the last six months of the 2022 year. The R80 000 000 needs to be financed entirely through a variety of loans. Your company has an excellent credit record, and the following is the value and related annual interest rate for each loan granted: Source Nedbank loan Convertible shares Government loan Foreign bonds Cryptocurrency Assume a 365-day year. REQUIRED: Q.1.1 Calculate the capitalisation rate. Amount (R) 30 000 000 15 000 000 15 000 000 12 000 000 8 000 000 Interest rate 15% 12% 5% 20% 7%

Question 1 Your business partner is interested in property investment and has been looking at properties in the Gauteng area for the last couple of years. During 2022 he invested in buildings in the Gauteng area. He intends to use these buildings as shared office space for business travellers who travel weekly between Johannesburg and their coastal residential homes. The buildings require renovations. The total cost of the renovations is R80 000 000. The renovations will be completed by 31 December 2022. The expenditure will occur evenly throughout the last six months of the 2022 year. The R80 000 000 needs to be financed entirely through a variety of loans. Your company has an excellent credit record, and the following is the value and related annual interest rate for each loan granted: Source Nedbank loan Convertible shares Government loan Foreign bonds Cryptocurrency Assume a 365-day year. REQUIRED: Q.1.1 Calculate the capitalisation rate. Amount (R) 30 000 000 15 000 000 15 000 000 12 000 000 8 000 000 Interest rate 15% 12% 5% 20% 7%

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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PT. Nusantara Indonesia is one of the most prestigious companies providing holiday travel packages to tourism destinations in Indonesia. The company's management is undergoing expansion strategy to cater higher demand in 2023 onward. As part of the strategy, the company is evaluating two independent projects that should be started in mid-2022 in order to be completed in the end of December 2027. In 2022, PT. Nusantara received new capital injection from strategic investor in California, US. Next week, the financial manager of PT. Nusantara Indonesia will bring the two project’s proposals to the board of directors for their approval. The manager prepares the cost and expected cash flows generating from the project as shown in Table 1. TABLE 1 Year Project Cenderawasih A Project Cenderawasih B 0 Initial investment of USD500,000 Initial investment of USD650,000 1 Cash flow year 1 = USD150,000 Cash flow year 1 of USD170,000 2 Cash flow year 2 = USD150,000 Cash flow increased by…
Question 3: The Muscat Electric Company ventures to a new project in the eastern part of the capital city which is a 200-kilometer, 300 kV transmission lines. The company has to choose between an Overhead Cable Transmission System and Underground Cable Transmission System. Table Q3 shows the initial investment for each type, the expected revenues during its lifetime which includes the cost savings incurred by underground transmission system over the overhead transmission system. The company has estimated a salvage value for each type of transmission to be 5% of the initial investment. As a company cost of capital is 8% per year. Using the following techniques for capital investment appraisal, perform the following; (i) Discounted payback period; (ii) Net present value NPV; (iii) Internal rate of return IRR. (iv) Determine which of the alternative is acceptable to the company based on the above results. Table Q3: Revenue & Expenses in Million OMR Overhead Underground Items Cable…