Question

2(a) Ramesh started a business by taking loan of Rs 20.00,000 from bank at 10% interest. He bought building for Rs 15, 00,000. Profit earned during the year is Rs 8, 00,000. Calculate the cash flow from various activities. (b) Calculate the amount of Investment purchased if: Investment in the beginning of the period Investment at the end of the period During the year, the company sold 40% of its investment held in the period at a profit of Rs 8,4 8,400 Rs 34,000 Rs 28,000​

Answer 1

Answer:

two projects x and y having same investment rs 10000 are under consideration for investment by a firm. inflow for project x is rs 6000. 6000 for next 2 year. while inflow of project y is 3000 and 9500 rs for next 2 year which project must be chosen if minimum required rate of return is 12 percentage

Explanation:

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Answer 2

Answer:

(a) Calculation of cash flow from various activities:

i. Cash flow from operating activities = Profit + Non-cash expenses - Non-operating incomes - Non-operating expenses

Profit = Rs 8,00,000

Non-cash expenses = Depreciation (assuming it to be Rs 2,00,000)

Non-operating incomes = Nil

Non-operating expenses = Interest paid (10% of Rs 20,00,000 = Rs 2,00,000)

Hence, Cash flow from operating activities = Rs 8,00,000 + Rs 2,00,000 - Rs 2,00,000 - Rs 2,00,000 = Rs 6,00,000

ii. Cash flow from investing activities = Purchase of building

Hence, Cash flow from investing activities = Rs 15,00,000

iii. Cash flow from financing activities = Loan taken from the bank

Hence, Cash flow from financing activities = Rs 20,00,000

Therefore, the total cash flow for the year would be: Rs 6,00,000 (cash flow from operating activities) + Rs 15,00,000 (cash flow from investing activities) + Rs 20,00,000 (cash flow from financing activities) = Rs 41,00,000

(b) Calculation of Investment purchased:

The net investment held at the end of the period = Investment at the end of the period - Investment sold during the year

Investment sold during the year = 40% of Investment held during the period = 0.4 x Rs 34,000 = Rs 13,600

Therefore, the net investment held at the end of the period = Rs 28,000 - Rs 13,600 = Rs 14,400

The investment purchased during the period would be the sum of the net investment held at the end of the period and the investment sold during the year, which is Rs 14,400 + Rs 13,600 = Rs 28,000.

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