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Summit Ltd. issued a new bond five years ago.
The bond was sold at par (Sh 1,000) and has a coupon rate of 12% and a...
(Solved)
Summit Ltd. issued a new bond five years ago.
The bond was sold at par (Sh 1,000) and has a coupon rate of 12% and a maturity of 30 years.
Coupon payments are made semi-annually. The interest rate has currently gone down to 10%.
Required:
(i) The current price of the bond.
(ii) The current yield to maturity of the bond.
(iii) The capital gain on the bond.
Date posted:
March 30, 2022
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Answers (1)
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Zedi Ltd. is forecasting a growth rate of 12% per annum for the next 2 years. The growth rate is likely to fall to 10%...
(Solved)
Zedi Ltd. is forecasting a growth rate of 12% per annum for the next 2 years. The growth rate is likely to fall to 10% for the third and fourth years. After that, the growth rate is expected to stabilise at 8% per annum. The company has just paid a dividend of Sh.1.50 per share and the investors' required rate of return is 16%.
Required:
The intrinsic value per share of Zedi Ltd.
Date posted:
March 30, 2022
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Answers (1)
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Malikia Guyo borrowed Sh.1, 000,000 from Huduma Bank at an annual compound interest of 14% on the reducing balance. The loan was repayable in annual...
(Solved)
Malikia Guyo borrowed Sh.1, 000,000 from Huduma Bank at an annual compound interest of 14% on the reducing balance. The loan was repayable in annual instalments over a period of four years. The installments were payable at end of the year.
Required:
A loan amortisation schedule.
Date posted:
March 30, 2022
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Answers (1)
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At the beginning of year 2008, James Chiro deposited Sh.1,000,000 in an investment account which earned compound interest at 15% per annum. At the beginning...
(Solved)
At the beginning of year 2008, James Chiro deposited Sh.1,000,000 in an investment account which earned compound interest at 15% per annum. At the beginning of each subsequent year, James Chiro deposited a further Sh.500,000 in the same account.
Required:
(i) The amount of money in the investment account by the end of year 2012
(ii) The percentage interest earned over the investment period.
Date posted:
March 30, 2022
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Answers (1)
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Bamba Ltd. has constructed a commercial building in an upmarket location in your capital city which the management intends to sell at Shs .8,400,000. However,...
(Solved)
Bamba Ltd. has constructed a commercial building in an upmarket location in your capital city which the management intends to sell at Shs .8,400,000. However, a prospective tenant has offered to rent the offices for 8 years at a fixed annual rent of Sh. 160,000. At the end of the eighth year, the building will be sold.
A real estate adviser estimated that the price of the building will increase by 3% per annum. The company's cost of capital is 5%.
Required:
Advise the management of Bamba Ltd. on whether to sell the building now or rent out the offices.
Date posted:
March 30, 2022
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Answers (1)
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Shadrack Chando borrowed Sh.80,000 from XYZ commercial bank at an interest rate of 1.25% compounded monthly. The loan is to be amortized using the reducing...
(Solved)
Shadrack Chando borrowed Sh.80,000 from XYZ commercial bank at an interest rate of 1.25% compounded monthly. The loan is to be amortized using the reducing balance method and be repaid in 12 equal monthly installments payable at the end of each month.
Required:
A loan amortization schedule.
Date posted:
March 30, 2022
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Answers (1)
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Explain how a ranking conflict between the net present value (NPV) and the internal rate of return (IRR) can be resolved.
(Solved)
Explain how a ranking conflict between the net present value (NPV) and the internal rate of return (IRR) can be resolved.
Date posted:
March 30, 2022
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Answers (1)
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John Matata has just borrowed Sh.220,000 from a bank payable at 12% per annum compounded annually to be repaid in six equal annual instalments.
(Solved)
John Matata has just borrowed Sh.220,000 from a bank payable at 12% per annum compounded annually to be repaid in six equal annual instalments.
These payments are to be sufficient to repay the principal amount together with interest.
Required;-
The loan amortization schedule.
Date posted:
March 30, 2022
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Answers (1)
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“Despite the large investment in the stock exchange and the various government incentives, only a few companies are listed at the stock exchange of the...
(Solved)
“Despite the large investment in the stock exchange and the various government incentives, only a few companies are listed at the stock exchange of the three East Africa Countries“. This was the opening remark by the guest speaker in a seminar whose theme was “Developing our capital market.”
Required:
i) The advantage of being listed at the stock exchange.
ii) Highlight four factors that may hinder companies from being listed at the stock exchange.
Date posted:
March 30, 2022
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Answers (1)
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Discuss the role of a capital markets authority in the development of a country’s financial markets.
(Solved)
Discuss the role of a capital markets authority in the development of a country’s financial markets.
Date posted:
March 30, 2022
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Answers (1)
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Explain the main factors behind the rapid development of capital markets in your country.
(Solved)
Explain the main factors behind the rapid development of capital markets in your country.
Date posted:
March 30, 2022
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Answers (1)
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Distinguish between "financial gearing" and "operating gearing".
(Solved)
Distinguish between "financial gearing" and "operating gearing".
Date posted:
March 30, 2022
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Answers (1)
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Outline the factors that contribute to the slow growth of capital markets in many emerging economies.
(Solved)
Outline the factors that contribute to the slow growth of capital markets in many emerging economies.
Date posted:
March 30, 2022
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Answers (1)
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Distinguish between “untraded debt” and “floating-rate debt”.
(Solved)
Distinguish between “untraded debt” and “floating-rate debt”.
Date posted:
March 30, 2022
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Answers (1)
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Briefly explain why companies list their shares on more than one stock exchange.
(Solved)
Briefly explain why companies list their shares on more than one stock exchange.
Date posted:
March 30, 2022
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Answers (1)
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Explain three measures that developing countries could implement in order to improve their financial markets.
(Solved)
Explain three measures that developing countries could implement in order to improve their financial markets.
Date posted:
March 30, 2022
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Answers (1)
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Explain the factors that influence the type of finance sought by a manufacturing company.
(Solved)
Explain the factors that influence the type of finance sought by a manufacturing company.
Date posted:
March 30, 2022
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Answers (1)
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Bidii Ltd expects a return on investment (ROI) of 24 % on proposed investment projects whose total cost is 5,000,000. In order to finance these...
(Solved)
Bidii Ltd expects a return on investment (ROI) of 24 % on proposed investment projects whose total cost is 5,000,000. In order to finance these investment projects the company is considering two options.
Option one
Issue 500,000 ordinary shares at a par value of sh. 10 each.
Option two
Issue 250,000 ordinary shares at a par value of sh. 10 each and obtain the balance through a bank loan at an interest rate of 15% per annum.
The rate of corporation tax is 30%
Required:
Determine the effect of the two financing options on the earnings available to shareholders and hence advise the company on the best financing option.
Date posted:
March 30, 2022
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Answers (1)
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Explain four reasons that may drive a company to raise equity finance rather than debt finance.
(Solved)
Explain four reasons that may drive a company to raise equity finance rather than debt finance.
Date posted:
March 30, 2022
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Answers (1)
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The following information was extracted from the accounting records of Karibu Ltd. As at 31 December 2008.
(Solved)
The following information was extracted from the accounting records of Karibu Ltd. As at 31 December 2008.
Sales revenue for the year ending 31 December 2009 is expected to increase by 25% . Total assets
and accounts payable are proportional to sales and that relationship will be maintained in future.
The company raised sh. 150 million by floating new ordinary shares on 1 January 2009. The
company’s profit margin on sales is 6 percent. 60 per cent of the earnings attributable to ordinary
shareholders will be paid out as dividends.
Required:
i) Total debt for Karibu Ltd. as at 31 December 2008.
ii) The new long term – debt financing that will be needed in the year 2009.
Date posted:
March 30, 2022
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Answers (1)