SECTION -B (Total 70 Marks) Q3. ABC steel plant industry plans to manufacture a product. The product needs a special com

[answerhappygod]

Section B Total 70 Marks Q3 Abc Steel Plant Industry Plans To Manufacture A Product The Product Needs A Special Com 1 (209.28 KiB) Viewed 53 times

SECTION -B (Total 70 Marks) Q3. ABC steel plant industry plans to manufacture a product. The product needs a special component. The industry has reviewed that the special component can be produced in the plant or bought in. An investment is required to start the production of the component for which two mutually exclusive projects A and B representing different production processes are available. The alternative option is to buy in from a tother company representing project C. The details of projects A and B are given in Table 3: (1) Using the information from table 3 and Discount Cash Flow criteria, calculate Pay Back Period (PBP), Account Rate of Return (ARR), Net Present Value (NPV) and Internal Rate Return (IRR) for project A & Project B if the industry plans to manufacture 6,000 units per year. [28 Marks] [Marking Rubrics: Back Period (PBP) for the project A & project B - 4 Marks, Account Rate of Return (ARR) for project A & project B - 4 Marks, Net Present Value (NPV) for the project A & project B-8 Marks, and Internal Rate Return (IRR) for the project A & project B-12 Marks.] (ii) Using the annual cost data from table 3, determine which project incurs less cost if the industry considers producing 7,500 units per year. [4 Marks] (ii) Determine the Break-Even quantity and margin of safety (units and value) If the company sells 8,000 units of new product per year at a price of RO 250 [8 Marks] Table 3 Description Capital (RO) Life (years) Capacity (units per year) Salaries per year (RO) Other fixed costs per year (RO) Wages per year (RO) Cost of materials per year (RO) Other variable costs per year (RO) Scrap value at the end of the year (RO) Cost of capital (%) Project-A 367,790 15 10,000 45,000 40,000 70,000 215,930 35,000 33,070 Project-B 479,780 15 12,000 50,000 85,000 80,000 275,440 40,000 ge ។ 1 40,400 18 18