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    Baf 2104: Financial Management CAT Instructions Time: 1 Hour

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    cyrus
    This document provides instructions for a 1 hour exam with two questions. Question One asks to discuss the importance of finance in an organization, and then calculate the effective cost of debt, cost of equity, and weighted average cost of capital for a company called V ltd using financial information provided. Question Two provides cash flow information for a proposed investment project and asks to calculate the accounting rate of return, discounted payback period at 6%, and net present value at 15% to determine the project's feasibility.

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    Baf 2104: Financial Management CAT Instructions Time: 1 Hour

    Uploaded by

    cyrus
    59 views2 pages
    This document provides instructions for a 1 hour exam with two questions. Question One asks to discuss the importance of finance in an organization, and then calculate the effective cost of debt, cost of equity, and weighted average cost of capital for a company called V ltd using financial information provided. Question Two provides cash flow information for a proposed investment project and asks to calculate the accounting rate of return, discounted payback period at 6%, and net present value at 15% to determine the project's feasibility.

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    BAF 2104 cat (1)

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    This document provides instructions for a 1 hour exam with two questions. Question One asks to discuss the importance of finance in an organization, and then calculate the effective cost of debt, cost of equity, and weighted average cost of capital for a company called V ltd using financial information provided. Question Two provides cash flow information for a proposed investment project and asks to calculate the accounting rate of return, discounted payback period at 6%, and net present value at 15% to determine the project's feasibility.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    59 views2 pages

    Baf 2104: Financial Management CAT Instructions Time: 1 Hour

    Uploaded by

    cyrus
    This document provides instructions for a 1 hour exam with two questions. Question One asks to discuss the importance of finance in an organization, and then calculate the effective cost of debt, cost of equity, and weighted average cost of capital for a company called V ltd using financial information provided. Question Two provides cash flow information for a proposed investment project and asks to calculate the accounting rate of return, discounted payback period at 6%, and net present value at 15% to determine the project's feasibility.

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    BAF 2104: FINANCIAL MANAGEMENT

    CAT
    INSTRUCTIONS TIME: 1 HOUR
    Attempt all questions

    QUESTION ONE
    a) Discuss the importance of finance in an organization (10 marks)
    b) You are provided with the following information relating to V ltd

    Equity and liabilities


    18% debentures (shs1000 at par) 16,000
    10% preferences shares 6,250
    Ordinary shares (Shs 10 par) 12,500
    Retained earnings 28,125

    Additional information
    i. The debentures are currently selling at Shs 950 in the market
    ii. Company paid a dividend of Shs 5.00 per ordinary share and they are expected to grow at
    a rate of 10% per annum.
    iv. The corporation tax is 40%
    Required
    Effective Cost of debt (5 marks)
    Cost of equity (5 marks)
    Weighted Average cost of capital (5 marks)

    QUESTION TWO
    A company is considering an investment proposal to install new milling controls. The project
    will cost Kes50,000,000. The facility has a life expectancy of five years and no salvage value.
    The company’s tax rate is 40%. The estimated cash flows from the proposed investment
    proposal are as follows:
    Year CF Kes 000
    1 13,000
    2 14,000
    3 18,000
    4 23,000
    5 25,000

    Compute:
    a. Accounting Rate of Return (2Marks)
    b. Discounted payback period at 6% discounting factor (4 Marks)
    c. Net present value at 15% discounting factor and advise management on the project’s
    feasibility ( 4 Marks)

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