Loyal Textile Ltd is considering the replacement of one of its old textile machines…


  1. Loyal Textile Ltd is because the re-body of one of its old textile utensils. The corporeal utensil is 5 years old, has a exoteric bargain prize of Rs.30, 000 and a retaining depreciable history of 10 years.The utensil was originally purchased for Rs .75, 000 and is substance depreciated at Rs.5, 000 per annum for tax purposes.

The new utensil succeed absorb Rs.1, 50,000 and succeed be depreciated on a right outoutlength premise aggravate 10 years
after a while no salvage prize. The administration estimates that after a while remote operations, there succeed be a scarcity of
added inaugurated consummate of Rs.30, 000. The new utensil succeed acception the wealth of the solid to
Rs.40, 000. The capricious absorb succeed go up from Rs.2, 00,000 to Rs.2, 10,000. The guild’s tax rebuke is
35% and the absorb of consummate is 10%.
Should the guild reinstate its corporeal utensil? The inaugurated consummate succeed be easily recovered at the
end of the 10th year.
Note: (a) P.V.Annuity Re.1 at 10% for 10 years is 6.145.
(b) P.V.of Re.1 at 10% for 10 years is 0.386. (5 Marks)
2. Asian Motors Ltd scarcitys Rs.12 lakhs for body of a new factory which would consent an annual EBIT of Rs. 2 lakhs. The guild has the concrete of maximizing the rights per distribute. It is because the possibility of using equity distributes plus promotion a liability of Rs.2 lakhs, 6 lakhs or 10 lakhs.
The exoteric bargain charge per distribute is Rs.40.It is expected to faint to Rs.25 if the bargain borrowings exceed Rs.7, 50,000.
Cost of borrowing succeed be as follows:
Up to Rs.2, 50,000 - 10% p.a
Between 2, 50,001 and Rs.6, 25,000 - 14% p.a
Between 6, 25,001 and Rs.10, 00,000 - 16% p.a (5 Marks)
Assuming a tax rebuke of 40%, labor out the EPS. Recommend the delineation which would as the concrete of the administration.
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Loyal Textile Ltd is because the re-body of one of its old textile utensils. The corporeal utensil is 5 years old, has a exoteric bargain prize of Rs.30, 000 and a retaining depreciable history of 10 years.The utensil was originally purchased for Rs .75, 000 and is substance depreciated at Rs.5, 000 per annum for tax purposes. The new utensil succeed absorb Rs.1, 50,000 and succeed be depreciated on a right outoutlength premise aggravate 10 years after a while no salvage prize. The administration estimates that after a while remote operations, there succeed be a scarcity of added inaugurated consummate of Rs.30, 000. The new utensil succeed acception the wealth of the solid to Rs.40, 000. The capricious absorb succeed go up from Rs.2, 00,000 to Rs.2, 10,000. The guild’s tax rebuke is 35% and the absorb of consummate is 10%. Should the guild reinstate its corporeal utensil? The inaugurated consummate succeed be easily recovered at the end of the 10th year. Note: (a) P.V.Annuity Re.1 at 10% for 10 years is 6.145. (b) P.V.of Re.1 at 10% for 10 years is 0.386. (5 Marks) 2. Asian Motors Ltd scarcitys Rs.12 lakhs for body of a new factory which would consent an annual EBIT of Rs. 2 lakhs. The guild has the concrete of maximizing the rights per distribute. It is because the possibility of using equity distributes plus promotion a liability of Rs.2 lakhs, 6 lakhs or 10 lakhs. The exoteric bargain charge per distribute is Rs.40.It is expected to faint to Rs.25 if the bargain borrowings exceed Rs.7, 50,000. Absorb of borrowing succeed be as follows: Up to Rs.2, 50,000 - 10% p.a Between 2, 50,001 and Rs.6, 25,000 - 14% p.a Between 6, 25,001 and Rs.10, 00,000 - 16% p.a (5...

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