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    Buss 203 Business Finance

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    Tevin
    This document contains instructions and questions for a Business Finance exam covering the following topics: 1) Calculating the present value of a differential annuity cash flow with given values over 20 years and a 12% cost of capital. 2) Describing the economic advantages of primary and secondary markets. 3) Calculating the weighted average cost of capital for a company with given capital structure values including ordinary shares, retained earnings, preference shares, and debentures. 4) Determining the value of a 5 year 14% debenture that is redeemable at par, given a cost of capital of 11%. 5) Examining the shortcomings of venture capital.

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    Buss 203 Business Finance

    Uploaded by

    Tevin
    371 views2 pages
    This document contains instructions and questions for a Business Finance exam covering the following topics: 1) Calculating the present value of a differential annuity cash flow with given values over 20 years and a 12% cost of capital. 2) Describing the economic advantages of primary and secondary markets. 3) Calculating the weighted average cost of capital for a company with given capital structure values including ordinary shares, retained earnings, preference shares, and debentures. 4) Determining the value of a 5 year 14% debenture that is redeemable at par, given a cost of capital of 11%. 5) Examining the shortcomings of venture capital.

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    sample business finance paper

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    BUSS 203 BUSINESS FINANCE

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    This document contains instructions and questions for a Business Finance exam covering the following topics: 1) Calculating the present value of a differential annuity cash flow with given values over 20 years and a 12% cost of capital. 2) Describing the economic advantages of primary and secondary markets. 3) Calculating the weighted average cost of capital for a company with given capital structure values including ordinary shares, retained earnings, preference shares, and debentures. 4) Determining the value of a 5 year 14% debenture that is redeemable at par, given a cost of capital of 11%. 5) Examining the shortcomings of venture capital.

    Copyright:

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

    Buss 203 Business Finance

    Uploaded by

    Tevin
    This document contains instructions and questions for a Business Finance exam covering the following topics: 1) Calculating the present value of a differential annuity cash flow with given values over 20 years and a 12% cost of capital. 2) Describing the economic advantages of primary and secondary markets. 3) Calculating the weighted average cost of capital for a company with given capital structure values including ordinary shares, retained earnings, preference shares, and debentures. 4) Determining the value of a 5 year 14% debenture that is redeemable at par, given a cost of capital of 11%. 5) Examining the shortcomings of venture capital.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    UNIVERSITY EXAMINATIONS: 2020/2021

    EXAMINATION FOR THE DEGREE OF BUSINESS INFORMATION


    TECHNOLOGY
    BUSS 203: BUSINESS FINANCE
    FULL TIME/PART TIME/DISTANCE LEARNING
    DATE: APRIL, 2021 TIME: 3 HOURS

    INSTRUCTIONS: Answer ALL Questions

    QUESTION ONE
    a) Consider a 20year project with the following portion of cash flows.
    Years Cash flows
    1-6 years 4,000 p.a.
    7-10 years 5,000 p.a.
    11-17 years 8,000p.a.
    18-20 years 12,000 p.a.
    Suppose the cost of capital is 12%. The annuity between years 11-14 is received at the beginning
    of each period. Calculate the present value of the differential annuity.
    (10Marks)
    b) What economic advantages are created by the existence of
    i) Primary markets (5Marks)
    ii) Secondary markets. (5Marks)

    QUESTION TWO
    a) The capital structure of a company consist of the following items
    Sh.
    3m ordinary share 30m
    Retained Earnings 20m
    1m 10% pref. shares 20m
    0.2m 6% debentures 30m
    100m
    The current market value of the company’s ordinary shares is sh.30. The expected dividends per
    share at the end of the year is sh.1.20.
    The average growth rate in dividends has been 10% and this is expected to be maintained in the
    foreseeable future. The debentures of the company have a face value of sh. 150 however they
    currently sell for 100/= in the market. The debentures will mature in 100 years’ time. The
    preference shares of the company still sell at their par value. Assume a tax rate of 30%. Calculate
    the weighted average cost of capital for this company.
    (10Marks)
    b) A debenture is denoted as a 5 years 14% ksh. 3000. The debenture is redeemable at par.
    If the cost of capital is 11%, determine the value of this debenture.
    (5Marks)

    QUESTION THREE
    a) Examine the shortcomings of venture capital. (10Marks)

    b) One of the objectives of a firm are the financial goals. Why would a firm pursue other goals that
    are in conflict with the financial goals.

    (5Marks).

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