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Buss 301: Principles Of Finance Question Paper
Buss 301: Principles Of Finance
Course:Principles Of Finance
Institution: Gretsa University question papers
Exam Year:2013
GRETSA UNIVERSITY, THIKA
UNIVERSITY EXAMINATIONS
2012/2013 ACADEMIC YEAR
JANUARY- APRIL 2013 TRIMESTER
COURSE CODE: BUSS 301
COURSE TITLE: PRINCIPLES OF FINANCE
DATE: 11TH APRIL 2013 TIME: 11:30AM-2:30PM
INSTRUCTIONS TO CANDIDATES
1. QUESTION ONE IS COMPULSORY
2. ANSWER ANY OTHER THREE QUESTIONS
SECTION ONE.
1(A) (i) What is risk finance (3mks)
(ii) What is return of an asset (3mks)
(iii) What is coefficient of variation (3mks)
(B) Using the capital assets pricing model (CAPM), determine the expected return on assets J which has a beta of 1.5. The return on market portofolio is 11% while the risk free rate of return is 7% (3mks)
(C) Give some characteristics of a bond security (5mks)
(D) A company has just paid a dividend of sh 1.50. The firm finance manager expects the dividend will increase at 10% annual rate over the next 3 years at the end of the 3 years the growth rate will decline to 5% for the foreseeable future. The firm required rate return rate (rrr) is 15%. Estimate the current value of the companies share? (13mks)
SECTION TWO
2 (a) Why are capital budgeting decisions important (5mks)
(b) Hook industry is considering a project for implementing. The cash flows of the project are as given below. The firm has a cost of capital of 16%.
Initial investment (cf) 40000
Year (t) cash inflows(cf)
1. 13000
2. 13000
3. 13000
4. 13000
5. 13000
Required
i. Calculate the projects payback period (5mks)
ii. Calculate the project net present value(NPV)
(5mks)
3(A) What are some limitations of a financial plan
(5 mks)
(B) Discuss the various objectives of firms as they acquire and use funds (10mks)
4 (A) Write short notes on
i) Money markets versus capital markets (5mks)
ii) The role of financial markets in economic development. (5mks)
5. a Differentiate between an agent and a principal
(5mks)
b. Discuss two agencies kind of relationships in a corporate setup detailing how they occur and what can be done to resolve these conflicts
(10mks)
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