ADDIS ABABA UNIVERSITY

SCHOOL OF COMMERCE
ACCOUNTING & FINANCE PROGRAM UNIT
Individual Assignment (ACFN 3202)
Submission date: June 15, 2020

Question 1:
Assume that you are managing a project to extend an existing production line in a textile
factory, and you are about to start project planning. Due to the large size of the project along
with the regulatory and environmental considerations, the development of a detailed project
management plan will be critical. As a starting point for initial project planning, what is the first
thing you should do?

Question 2:
ABC Company is engaged on purchase and sale of truck tires. The monthly sales for the year
2019 are as follows:
Month:Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec
Sales:40 42 30 28 26 32 34 36 40 40 42 46

Required:
Forecast next month (i.e. next January) demand using each of the following methods:
A. Trend projection approach
B. 3-month moving average
C. 6-month weighted moving average using 0.05, 0.1, 0.15, 0.2, 0.2 and 0.3 with heaviest
weight applied to the most recent months.
D. Exponential smoothing using an α= 0.3 and December forecast of 36.
E. At this point in time, which method allows you to forecast next March’s sales?

Question 3:
Explain the similarities and difference between business plans and feasibility study?

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Question 4:
The days of coverage for the following items in your project are given below
Items Minimum days of coverage The annual requirements are
2010 2011
Cash 60 days Br.40,000 Br.45,000
Raw materials 20 days 60,000 70,000
Accounts Receivable 35 days 100,000 120,000
Work in process 10 days 15,000 17,000
Finished Goods 40 days 80,000 100,000
Accounts Payable 50 days 200,000 90,000
 The total net working capital for the construction period is Br.50,000
Required:
1) Compute the Net Working Capital requirements of each period
2) Compute the increase in Net Working Capital for each period

Question 5:
The following date is extracted from the feasibility study of G-X project. The expected outlays
and sources of finance during the construction period and 2 years of operation are given in
incremental form:
Outlays Construction Period 2010 2011
Preliminary expense 120,000 -- --
Current assets 50,000 -- 50,000
Fixed assets 500,000 -- --
Financing
Short term loan -- -- 50,000
Long term loan 300,000 -- --
Share capital 370,000 -- --
Additional Information:
 Sales level in terms of units of products is expected to be 400,000 units in 2010, and
440,000 in 2011
 Selling price per units is expected to be 100 birr and cost of a unit is 65 birr per unit
 Fixed assets are expected to have an economic life of 10 years with no salvage value
and depreciated using straight line method.
 Both short term loan and long term loan are taken at the beginning of the year at an
interest rate of 10% and 12% respectively.
 Preliminary costs will be written-off in 6 equal installments beginning the 1 st year of
production.
 Losses are carried forward indefinitely.
 The tax rate is 30% for all periods.
 The dividend payout ratio is 40% of earnings.
Required
Prepare the income statement of 2010 and 2011

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Question 6:
A manager at Moose Hardware is proposing a 4-year capital project with the following cash
flows:
Year 0 Year 1 Year 2 Year 3 Year 4
- Br.10,000 Br.4,400 Br.4,000 Br.3,500 Br. 500

The decision criteria for any project are that it must have one of the following: a payback of
2 years or less, the IRR must exceed 10%, and the NPV (return rate of 10.5%) must be
positive, based upon this criterion, analyze the feasibility of the project to this project?

Question 7:
The following data are about a certain product.
Production Import Export Ending Inventory
Year (in thousands) (in thousands) (in thousands) (in thousands)
2017 50 20 30 9 (75% of beg. Inv)
2018 65 25 40 10
2019 72 23 45 8

Required:
i. Calculate the effective demand of the product for each year (year 2017 – 2019)
ii. What is the demand function using trend projection method? Calculate the forecasted
demand for 2020 by using this demand function.