Neco 2021 Commerce Question 4

A Nigerian importer wishes to purchase a piece of machinery from a German supplier. The invoice price of the machinery is €45,000. The following additional costs apply: - Freight charges: €2,500 - Marine insurance (1.2% of the CIF value) - Import duty: 15% of the CIF value - Value‑added tax (VAT): 7.5% of (CIF value + import duty) The prevailing exchange rate is €1 = ₦560. Assume that the importer can obtain a 5% discount on the invoice price if the payment is made within 30 days. Answer the following questions: (a) Calculate the total cost of the machinery in Naira, assuming the discount is not taken. (b) Determine the total cost in Naira if the 5% early‑payment discount is availed. (c) Compute the effective rate of protection (ERP) on the machinery when the discount is not taken. Use the formula: ERP = [(Domestic value added – Imported value added) ÷ Imported value added] × 100%, where domestic value added = total cost – invoice price (in Naira) and imported value added = invoice price (in Naira). (d) Discuss briefly how a 5% depreciation of the Naira against the Euro would affect the total cost calculated in part (a).