illustration 4 part3

answered on 06-May-24 17:22

in the projdcted p&L the RM is shown as 470..actually it is calculated as 420

latest answer

420 is the RM consumed. But as Op st of 150 & cl st of 200 is mentioned, therefore RM purchased = RMC+ cl st - op st = 400+ 200 - 150 = 470

Vidya Suresh

CA Inter

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28

relation between eps and value of firm

answered on 04-May-24 13:29

sir, i dont get it, why cant we just calculate the minimum cost of capital for the given alternatives,the option having the minimum cost of capital should maximise the firms value, right?why do we have to go for that option that maximizes eps?how can we say that maximising the eps of a firm will eventually lead to maximisation of value??

latest answer

Having the least cost is one of the factors, but not only factor to result in the highest value. Also, as per few theories irrespective of capital structure, the overall cost & the value of the firm would remain constant. Hence trying to find the optimal capital structure from the benefit pov is another approach, where EPS is the ultimate benefit left out after addressing all the finance costs. Hence it is considered as a wealth indicator. Also for the firms which are traded in the market, EPS multiplied with PE ratio gives value of MPS which is also a wealth indicator.

aravind lalji

CA Inter

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68

Investment

answered on 06-May-24 20:08

Why sale of old machine is taken net of taxes.please clarify sir

latest answer

Okk thank you

Ramya Telikicherla

CA Inter

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Investments

answered on 07-May-24 20:19

Please clarify this sir.this is mtp 1 sir .here they computed short term capital loss.but practical questions 10 and 11 of ICAI is also same model.But there they didnt compute stcg or stcl.if in question didn't mentioned anything about capital gain tax should we compute it or not

latest answer

OK sir thank you

Ramya Telikicherla

CA Inter

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83

Investments

answered on 06-May-24 20:19

This is may 24 RTp.here in the solution stcg is nil.what should be the treatment if stcg or stcl arrises

latest answer

Ok sir.thank you

Ramya Telikicherla

CA Inter

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4

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doubt regarding computation of cost and debt

answered on 03-May-24 17:22

sir,in this sum, while computing the cost of equity using the second method you have taken the cost of capital to be 15%(pre tax) and while computing the overall cost of capital you have taken the post tax cost of capital.why is that so???

latest answer

The computation of Ke in the 2nd method is based on formula, where Kd is pre-tax. Please go through the derivation of the formula in the video lecture to understand that better. Regarding the Overall cost, as per the fundamentals, it shall be computed based on post tax specific costs only.

aravind lalji

CA Inter

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61

Marginal Tax rate

answered on 06-May-24 12:59

Is there a difference between Marginal tax rate and Normal tax rate ?

latest answer

Ok sir , Thank you for your clarification

THARAKESH M

CA Inter

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59

Table book in exam

answered on 30-Apr-24 12:19

I wanted to know whether Present Value and annuity tables are provided to students[on request] in FM exam?

latest answer

They are provided

Yoganathan LAKSHMANAN

CA Inter

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2

63

treasury and cash management

answered on 03-May-24 16:51

Illustration-4(video no. 14) we're taking stores and manufacturing expenses as variable costs keeping year 2 as base. but shouldn't it be the same % for year 1 also? example: year 2- stores = 12% of sales but if I compute for year 1, it's 12.5% of sales now for the computation of year 3 stores, should I take year 1 or year 2 as base?

latest answer

As there is no specific mention, we assume that stores & manufacturing expenses are based on the latest year sales and hence we took 2nd year’s data. So it’s not mandatory that like RM consumed, stores & manufacturing expenses should be purely variable. So as per the assumption, 2nd year being the latest shall be taken as base

Roobashree Rajagopal

CA Inter

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65

Doubt

answered on 28-Apr-24 13:13

Sir, In the question a point is given like this *Inflation is expected to be 6% per year Why this point is ignored and not taken into consideration

latest answer

This question is concerned with treatment of adjusting inflation with discount rate which belongs to the chapter “Risk Adjusted Capital Budgeting” which is currently not a part of the syllabus. So Please ignore

Narasimha G

CA Inter

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