Course Hero Logo

10270981- MCPC612 Financial Management.pdf - UNIVERSITY OF...

Course Hero uses AI to attempt to automatically extract content from documents to surface to you and others so you can study better, e.g., in search results, to enrich docs, and more. This preview shows page 1 - 5 out of 10 pages.

UNIVERSITY OF PROFESSIONAL STUDIES, ACCRA (UPSA)SCHOOL OF GRADUATE STUDIES (SOGS)GRADUATE PROGRAMME(LEVEL 600-PART I)TAKE HOME EXAMINATION (THE)Students’ SubmissionSheetEND OF SECOND SEMESTER EXAMINATIONS2020/2021 ACADEMIC YEARMCPC612: FINANCIAL MANAGEMENTTIME ALLOWED:24 HOURSDATE:Start Date:Tuesday, June 15, 2021 @ 12:00 noonEnd Date:Wednesday, June 16, 2021 @ 12:00 noonSTUDENT ID. NUMBER:GPS/PHYSICAL ADDRESS OF THE STUDENT:SUBMISSION EMAIL ADDRESS:[email protected]and UPSA E-Learning Platform(join.upsavirtual.site)INSTRUCTIONSATTEMPT ALL THREE (3) QUESTIONSYou have been given 24 hours to download and answer the questions in this paper. You mustsubmit your answers by uploading the answer scripts on the two submission platforms([email protected] andjoin.upsavirtual.site)FAILURE TO UPLOAD THE ANSWERS WITHIN THE STATED PERIOD ISCONSIDERED ABSENT FROM THE EXAMINATION.GW-0020-348210270981
SOLUTIONQuestion 1WorkingsDebt = 1,000,000Equity= 1,300,0002,300,000Cost of debt= 15%Cost of Equity (CAPM) =RF + B (RM- RF) =5+ 2.5 (10-5) = 17.5%WACC =Ve/ve +vd x ke + vd/ve+vd x kd=1,300,000/2,300,000 x 0.175 + 1,000,000/2,300,000 x 0.15=0.164Cash inflows in GHC12345units8,3009,20010,4009,8008,400Sellingprice(GHC)345345345345345Total revenue(GHC)2,863,5003,174,0003,588,0003,381,0002,898,000Variablecost/unit(GHC)190190190190190Total(1,577,000)(1,748,000)(1,976,000)(1,862,000)(1,596,000)Fixed cost(240,000)(240,000)(240,000)(240,000)(240,000)Depreciation(368,000)(368,000)(368,000)(368,000)(368,000)PBT678,500818,0001,004,000911,000694,000Tax-----PAT678,500818,0001,004,000911,000694,000
Add backDepreciation368,000368,000368,000368,000368,000Cash fromoperations1,046,5001,186,0001,372,0001,279,0001,062,000Scrap balance----460,000Changes inworking capital(279,525)(46,575)(62,100)31,050507,150766,9751,139,4251,309,9001,310,0502,029,150Cannibalization(100-70) x1000(30,000)(30,000)(30,000)(30,000)(30,000)Profit736,9751,109,4251,279,9001,280,0501,999,150WorkingsChanges in net working capital in GHC012345opening150,000150,000429,525476,100538,200507,150closing-429,525476,100538,200507,1500changes150,000(279,575)(46,575)(62,100)31,050507,150Depreciation = 2,300,000460,000/5years =GHC 368,000Salvage value = 20% x 2,300,000 = GHC 460,000Outflows=Initial cost of equipment = GHC 2,300,000Initial working capital =GHC 150,000TOTAL = GHC 2,450,000
NPVYearCFDF =0.164PV0(2,450,000)1.0000(2,450,000)1736,9750.8591633,135.2221,109,4250.7381818,866.5931,279,9000.6341811584.5941,280,0500.5447697,243.2351,999,1500.4680935,602.20Total1,446,432The company should go ahead with the production since NPV is positive 1,446,432B.Business factors to consider includes:Availability of funds- he should ensure whether there is enough funds to cater for anyobligation that will constitute to the success of the project. Thus to prevent a scenariowhere project is ongoing and funds to continue becomes difficult to come byStructure of capital- deciding on whether to go all in on debt financing or a combinationof both debt and equity finance is plays a role on how he will service the financialobligation of the projectTaxation policyQUESTION 2a.

Upload your study docs or become a

Course Hero member to access this document

Upload your study docs or become a

Course Hero member to access this document

End of preview. Want to read all 10 pages?

Upload your study docs or become a

Course Hero member to access this document

Term
Fall
Professor
DR. J. OFOSU-MENSAH
Tags
Finance, Debt, Financial Director, SCHOOL OF GRADUATE STUDIES

Newly uploaded documents

Show More

Newly uploaded documents

Show More

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture