CFM 101 BUSINESS FINANCE DAY EVENING KITENGELA.pdf -...

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1 UNIVERSITY EXAMINATIONS: 2013/2014 ORDINARY EXAMINATION FOR THE BACHELOR OF COMMERCE CFM 101 BUSINESS FINANCE DAY EVENING KITENGELA DATE: AUGUST, 2014 TIME: 2 HOURS INSTRUCTIONS: Answer Question One and Any Other Two Questions QUESTION ONE :( 30 MARKS) (a)Outline by giving examples the difference between systematic and unsystematic risk. (4 Marks) (b)A debenture is denoted as 12% Sh.1000, 3 years debenture. Determine the value of this debenture assuming the cost of capital is 10%. (3 Marks) (c)Discuss any 5 shortcomings of the profit maximization goal. (5 Marks) (d)The following balance sheet relates to XYZ Ltd. As at 31/12/2013: Sh.M Net fixed assets 13 Stock 2 Debtors 318Financed by: Creditors 6 Ordinary shares 4 Retained earnings 6 8% Long term debt 218
2 Additional information1.The sales for 2013 were Sh.20M and it is expected to increase by Sh.4M in 2014. 2.The net profit margin is 8%. 3.The company has a dividend payout ratio of 70% which is expected to be maintained in the future. Required:(i)Determine the amount of external financing required. (6 Marks) (ii)Prepare the company’s pro-forma balance sheet as at 31/12/2014. (6 Marks) (iii)

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