5 your company just recently purchased fiji

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5) Your company just recently purchased Fiji Government Bonds to raise finance. Surprisingly, the Earnings Per Share (EPS) had increased. The Chief Investment Officer is confused and wants your advice. Advise the Chief Investment Officer on why the EPS might have increased. 6) Calculate the Earnings Per Share (EPS) and the Market Capitalization of this company. Do you see any growth patterns in the company’s Dividends? 7) You have been approached by an investor and the investor wants advice whether or not to invest in your company. As the Investment Consultant, advise the investor on whether or not he should invest in your company. Total marks: 50 marks
AF208 MAJOR ASSIGNMENT SEMESTER 2, 2018 7 | P a g e QUESTION 2: Theoretical/Practical Questions Part A: (12 marks) Joseph ’s Engineering Ltd need to acquire new equipment and it can either take a loan or have a lease option. The loan funds of $100 000 at 8.2% p.a. after tax, compounded semi-annually for 2 years. The company has three directors in the business and they pay individual income tax at an average rate of 35%. Inland Revenue Department (Tax office) allows depreciation at the rate of 50% p.a. on this equipment. Advise the company which is the better deal, the loan or a 2 year lease with four equal payments of $26,674 starting with the first payment at the signing of the contract. Assume that corporate tax rate is 28% for s implicity’s sake the tax benefits from each lease payment and the tax benefits forgone for depreciation are received without time lag in each half-year period. Required: a. Which method of financing would you recommend? Why? (Hint: Show analysis of cash flow) b. List potential benefits associated with leasing? Part B: (8 marks) Pacific Energy Ltd outlet has a throughput of 180 000 litres of Unleaded fuel each week. Purchases are always made in multiples of 1000 litres. Holding costs including evaporation and variation in volumes due to temperature changes are estimated to be $10 per 1000 litres. Ordering costs are $1 per order. Required: a. What is EOQ, calculate on weekly data of Pacific Energy? b. Given the circumstances above, do you believe Pacific Energy would keep strictly to the EOQ with each order it submits to its suppliers? Why or why not? If you calculated the EOQ on daily turnover data, what values must change to achieve the same EOQ as calculated on a weekly basis? c. List some management techniques used by financial managers in Pacific Energy to assist in inventory management? [Hint: Pacific Energy ’s inventory is the Fossil Fuel] d. What are the assumptions underlying economic order quantity (EOQ) theory? Relate it to Pacific Energy Ltd. Total marks: 20 marks [Note: While answering, treat each part individually. Write an Essay format]
AF208 MAJOR ASSIGNMENT SEMESTER 2, 2018 8 | P a g e QUESTION 3: Calculation Question Fiji Golf Ltd has decided to sell a new line of golf clubs. The club will sell for $700 per set and have a variable cost of $340 per set. The company has spent $150,000 for a marketing study that determined the company will sell 46,000 sets per year for seven years. The marketing study also determined that the company will lose sales of 12,000 sets of its high-priced clubs. The

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