Get premium membership and access revision papers, questions with answers as well as video lessons.
Fina 023: Financial Management Question Paper
Fina 023: Financial Management
Course:Accounting,Finance And Investiments
Institution: Kenya Methodist University question papers
Exam Year:2012
KENYA METHODIST UNIVERSITY
END OF 3''RD ''TRIMESTER 2012 (EVENING) EXAMINATIONS
SCHOOL : BUSINESS AND ECONOMICS
DEPARTMENT : ACCOUNTING & FINANCE
UNIT CODE : FINA 023
UNIT TITLE : FINANCIAL MANAGEMENT
TIME: 2 HOURS
Instructions: Answer Question ONE and any other TWO.
Question One
Discuss the various factors that influence the capital structure of a company.
(10 Marks)
Herufi company has the following capital structure on 31.12.2012
Equity shares (400,000) 8,000,000
10% Preference shares 2,000,000
14% Debentures 6,000,000
The share of a company currently sells for shs 25. It’s expected that the company will pay a dividend of shs 2/= share which will grow at 7% for ever. If the tax rate is 50%, compute the weighted cost of capital based on existing capital structure. (15 Marks)
Shed light as the functions of financial managers.
(5 Marks)
Question Two
One of the main functions of a finance manager is to manage working capital in such a way that the short term resources are maximally utilized. Clearly Illustrate the main components of working capital and explain strategies used in managing each component or working capital. (20 Marks)
Question Three
Within financial management context discuss problem that might exist in the relationships between;
(4 Marks)
Shareholders and managers
(3 Marks)
Shareholders and creditors
(3 Marks)
Discuss the Agency theory and suggest ways of reducing conflict between managers and the shareholders.
(10 Marks)
Question Four
Critique the profit maximization as an objective of a firm.
(10 Marks)
Discuss in dept the available sources of finance, both long term and short term.
(10 Marks)
Question Five
A company is considering TWO mutually exclusive projects requiring a cost out lay of shs.10,000 each and with a useful life of 5 years. The company required rate of return is 10% and the appropriate corporate tax rate is 50%. The projects will be depreciated as a straight line basis, the expected cash flows from the projects before depreciation and tax are as follows.
Year 1 2 3 4 5
Project A 4000 4000 4000 4000 4000
Project B 6000 3000 2000 5000 5000
Required:
Distinguish between mutually exclusive and independent project.
(3 Marks)
Calculate for each project; Accounting Rate of Return; Net present value; and Internal Rate of Return.
(15 Marks)
Which project should be accepted? Why?
(2 Marks)
More Question Papers
Popular Exams
Return to Question Papers