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a) Zambridin needs an additional fund of $1,200,000 to finance its short term project. The

project will take eight (8) months to be completed. The company has the following alternatives to choose from. Calculate the effective cost for each of the following alternatives.

Alternative 1

A loan from ABC Bank at a discounted interest rate of 8 percent per annum and 15 percent compensating balance. The present account balance of the company is $150,000.


Alternative 2

Issue a commercial paper with a face value of $100,000 each at 9 percent per annum. The issuing cost is $1,500 per paper.

Alternative 3

Forego trade credit with the following credit terms of 3/15 net 50.

Alternative 4

A revolving credit facility of $1,500,000 which charges 10 percent annual interest rate on the used amount, 3 percent commitment fee on the unused portion. The bank also requires a 10 percent compensating balance.

Choose the best alternative and provide reasons for your answer

b) Differentiate two (2) types of environment in financial management framework.














a)Farhana works as financial manager at Teratak Corporation, she were ask to submit a pro-forma statement of financial position as at 31 December 2018 and compute additional fund needed by the firm. The firm's current revenue stood at $2,375,000 and the firm is planning to increase its revenue next year by 40 percent. Currently, the firm is operating at full capacity. 

                                                              Teratak Corporation


Cash                                      100,000

Prepaid Expenses                180,000

Account Receivable            570,000

Inventories                           720,000

Plant & Equipment            3,000,000

TOTAL ASSETS                    4,570,000


Accruals                                 47,000

Trade Creditor                     200,000

Tax Accruals                         60,000

Accrued wages                     228,000

Notes Payable                       175,000

Bond                                        1,020,000

Common Stock                       2,000,000

Retained Earnings                  840,000


Additional information:

• The net earnings for the year was $365,250

• Dividend currently paid was $249,375

b)Explain any three (3) factors influencing the choice of buying marketable securities

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