Tag (SQ): Contracts

(A) Describe FOUR (4) ways in which the investment appraisal approach of a City Council will differ from a GoldPeak Ltd, a mining company.

(B) StarPrint Ltd has been printing all its magazines from a facility in Abu Dhabi due to cost advantages. The company is considering establishing its own printing department, and the R&D team has identified a printing machine that meets the quality and cost specifications of StarPrint Ltd. The machine also has the capacity to print to meet the market needs of the company. The machine, which has a useful life of 5 years, will cost GH₵800,000, and immediate installation cost will be GH₵50,000. Fixed cost for maintaining the machine will be GH₵170,000 per annum over the machine’s useful life, and additional working capital of GH₵30,000 will be introduced in year 2. The use of this machine will generate a contribution of GH₵500,000 per annum for five (5) years. Corporate income tax rate, payable in arrears, is 25%, and the company’s after-tax cost of capital is 20%. No capital allowance is permitted.

Required:
Calculate the NPV for the project and advise management on whether to accept or reject the project.

(C) Explain the following types of contracts:

(i) Mudaraba contract

(ii) Musharaka contract

(iii) Murabaha contract