Get premium membership and access revision papers, questions with answers as well as video lessons.
Got a question or eager to learn? Discover limitless learning on WhatsApp now -
Start Now!
Cfm 101 Business Finance (Saturday) Question Paper
Cfm 101 Business Finance (Saturday)
Course:Bachelor Of Commerce
Institution: Kca University question papers
Exam Year:2011
1
UNIVERSITY EXAMINATIONS: 2010/2011
FIRST YEAR EXAMINATION FOR THE DEGREE OF BACHELOR OF
COMMERCE
CFM 101 BUSINESS FINANCE (SATURDAY)
DATE: DECEMBER2011 TIME: 2 HOURS
INSTRUCTIONS: Answer Question One and Any Other Two Questions
QUESTION ONE
a) There are 51 companies listed at the Nairobi stock exchange . This is a very low figure
when compared to other leading stock exchanges like Hong Kong, London and New York.
Discuss the factors that account for this slow listing at the NSE.
b) Discuss the factors that affect the cost of capital
c) Discuss the causes of the agency problem and outline how to reduce the same (5 Marks)
d) Find the future values of the following ordinary annuities:
i) FV of 400,000 each 6 months for 5 years at a nominal rate of 12 percent,
compounded semiannually. (3 Marks)
ii) FV of 200,000 each 3 months for 5 years at a nominal rate of 12 percent,
compounded quarterly. (3 Marks)
QUESTION TWO
The following information represents the financial position and financial results of AMETEX
Limited for the year ended 31 December 2010.
AMETEX Limited
Trading, profit and loss account for the year ended 31 December 2010
Sh.”000” Sh.”000”
Sales – Cash
- Credit
300,000
600,000
900,000
2
Less: cost of sales
Opening stock
Purchases
Less: closing stock
Gross profit
Less expenses:
Depreciation
Directors’ emoluments
General expenses
Interest on loan
Net profit before tax
Corporation tax at 30%
Net profit after tax
Preference dividend
Ordinary dividend
Retained profit for the year
210,000
660,000
870,000
(150,000)
13,100
15,000
20,900
4,000
4,800
10,000
720,000
180,000
(53,000)
127,000
(38,100)
88,900
14,800
74,100
AMETEX Limited
Balance Sheet as at 31 December 2010
Sh.”000” Sh.”000” Sh.”000”
Fixed Assets
Current Assets:
Stocks
Debtors
Cash
Current Liabilities:
Trade creditors
Corporation tax payable
Proposed dividend
150,000
35,900
20,000
60,000
63,500
14,800
205,900
138,300
213,900
67,600
281,500
Financed by:
Ordinary share capital (Sh.10 par value)
8% preference share capital
Revenue reserves
10% bank loan
100,000
60,000
81,500
40,000 ______
281,500
Additional information:
1. The company’s ordinary shares are selling at Sh.20 in the stock market.
2. The company has a constant dividend pay out of 10%.
Required:
Determine the following financial ratios:
3
a) Acid test ratio. (2 Marks)
b) Operating ratio (2 Marks)
c) Return on total capital employed (2 Marks)
d) Price earnings ratio. (2 Marks)
e) Interest coverage ratio (2 Marks)
f) Total assets turnover (2 Marks)
QUESTION FOUR
Moon Investments Balance Sheet shows:
Bonds $ 200,000
Common shares $ 200,000
Retained Earnings $ 100,000
-------------
$ 500,000
=========
Bonds:
• Annual interest rate 6%
• Years to maturity is 9 years
Common shares:
• Shares held 100,000
• Current share price $5
• Market return over next year 12%
• Beta (somewhat risky) 1.15
• Treasury bills currently yield 4%
• Tax rate 25%
i) Calculation of Cost of Capital (10 Marks)
ii) Discuss the importance of the cost of capital (5 Marks)
iii) Discuss the factors that affect the cost of capital (5 Marks)
Question Five
Tom a budding entrepreneur wansts to start a juice making factory in Nairobi’s industrial Area.
Project will have an outlay of kshs 320,000. It is expected to start operation in 2012. The
cashflows are given below.
Year Cashflow
2012 150,000
2013 120,000
2014 90,000
2014 60,000
Calculate the IRR of the project. (20 Marks)
More Question Papers
Popular Exams
Return to Question Papers