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​​​​​​​FIN 2603 TESTBANK CHAPTERS 1 - 8 FINANCE FOR NON-FINANCIAL MANAGERS

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University of South Africa FIN 2603 TESTBANK CHAPTERS 1 - 8 FINANCE FOR NON-FINANCIAL MANAGERS Chapter 1: The financial goal of a firm Any organisation that is Page : 4 Group Chapter 2: Underst... anding financial statements & Chapter 3: Analysis of financial statements & Chapter 3: Analysis of financial statements Page : 10 D Chapter 4: Profit planning and Page : 14 Group Chapter 5: The time value of money Page : 25 Group Chapter 6: Capital budgeting Page : 29 True Chapter 7: Financing Page : 34 False Chapter 8: The management of working capital Page : 49 Chapter 5 This section will test your knowledge on Time Value of Money Page : 51 Chapter 6 This section will-test your knowledge on Capital budgeting. Page : 53 Chapter 7 This section will test your knowledge on Financing. Question 15 Page : 54 Chapter 8 This section will test your knowledge on the Management of Working Capital. Page : 58 Chapter 5 This section will test your knowledge on Time Value of Money Page : 61 Chapter 6 This section will test your knowledge on Capital budgeting Page : 62 Chapter 7 This section will test your knowledge on Financing Page : 64 Chapter 8 This section will test your knowledge on the Management of Working Capital. 2020 Semester 2 – FIN2603 Study Group TESTBANK CHAPTERS 1 - 8 FINANCE FOR NON-FINANCIAL MANAGERS - FIN2603 Chapter 1: The financial goal of a firm Any organisation that is managed in accordance with business principles should be able to ensure its survival because it will ... A. maximise its revenue from sales and control its expenses. B. plan its cash inflows and outflows by means of a cash budget. C. keep its cost of financing as low as possible. D. undertake all the above-mentioned financial measures. Current liabilities can be viewed as ... A. debts that mature in one year or less. B. debts that mature in more than one year. C. sources of cash inflows. D. irrelevant in calculating net working capital. During periods where the consumer price index (CPI) is expected to decrease, a retail firm will have to ... A. relax credit standards due to a decline in sales, a decrease in bad debts and a slowdown of cash outflow. B. expand due to declining interest rates, an increase in sales and improved feasibility of investment opportunities. C. apply credit standards more strictly due to declining interest rates, increase in sales, but a slowdown of cash inflow. D. budget more conservatively as a result of rising interest rates, a decline in sales and an increase in bad debts. Finance can be defined as the ... A. system of debits and credits. B. art and science of managing money. C. art of merchandising products and services. D. science of the production, distribution and consumption of wealth. If the company's managers are NOT owners of the company, they are ... A. outsiders. B. traders. C. dealers. D. agents. 2020 Semester 2 – FIN2603 Study Group One method often used by companies to ensure that management decisions are in the best interest of the shareholders is to ... A. have a shareholder meeting once a year. B. threaten to fire managers who do not performing adequately. C. tie management compensation to the performance of the company share price. D. tie management compensation to the level of earnings per share. The best way in which a firm may improve its profitability would involve ... A. reducing expenditure on non-core business activities. B. employing fewer permanent staff and using contract workers during peak periods. C. increasing sales by means of improved marketing. D. selling all its non-core assets The long-term financial goal of the firm may be achieved by ... A. maximising revenue and minimising expenses. B. minimising the cost of capital and maximising the internal rate of return (IRR). C. maximising the assets relative to the liabilities. D. accelerating cash inflows. The long-term financial goal of the firm may be achieved by ... A. maximising revenue and minimising expenses. B. minimising the cost of capital and maximising return (IRR). C. maximising the assets relative to the liabilities. D. accelerating cash inflows. The primary goal of a publicly-owned firm interested in serving its shareholders should be to ... A. minimise the debt used by the firm. B. maximise the EPS. C. maximise the share price. D. maximise the expected net income. The primary short-term financial goal of the firm may be best achieved by ... A. maximising revenue and minimising expenses. B. minimising the cost of capital and maximising the internal rate of return (IRR). C. increasing expenses in order to reduce the firm’s tax liability. D. accelerating cash inflows and delaying cash outflows. E. What financial securities are likely to be traded on the JSE Limited?2020 Semester 2 – FIN2603 Study Group A. Ordinary shares B. Treasury bills C. Commercial paper D. Company bonds What is the main function of a financial manager? A. To prevent bad debts. B. To ensure liquidity and solvency. C. To increase the value of ordinary shares. D. To earn returns greater than those of the competitors. Which of the following is a career opportunity in managerial finance? A. Investment management B. Real estate and insurance C. Capital expenditures management D. Personal financial planning Which of the following is not a responsibility of the treasurer of an organisation? A. Raising the necessary funds for the organisation in order to be sustainable and grow. B. Doing the tax payments for the organisation. C. Conducting and executing capital budgeting activities. D. Formulating and the credit policy of the organisation. Which source of the following funds are the most likely to be relayed on by small firms? A. Long-term debt B. Equity C. Preference shares D. Short-term debt Which stakeholders have the first claim on assets when a organisation enters bankruptcy? A. Creditors B. Top management C. Debtors D. Shareholders Who is/are the true owner(s) of an organisation? A. The board of directors. B. The chief executive officer. C. The shareholders. D. The creditors. 2020 Semester 2 – FIN2603 Study Group Chapter 2: Understanding financial statements & Chapter 3: Analysis of financial statements A company wishes to raise funds without lessening the control of current owners. Which source(s) of capital would be the most appropriate for the company? A. Share issue B. Debt C. Preference shares D. Options b and c A current ratio of 4:1 may indicate that the firm has too much ... A. cash. B. inventory. C. accounts receivable. D. all of the above. A current ratio of 4,5:1 may indicate the firm has too much ... A. cash. B. inventory. C. accounts receivable. D. All of the above. A decrease in assets is recorded by means of a ... entry and an increase in owners’ equity is recorded by means of a ... entry. A. debit; credit B. credit; debit C. debit; debit D. credit; credit A firm can best improve its return on equity (ROE) by increasing the ... A. sales and decreasing expenditure. B. asset turnover and financial leverage. C. net profit margin. D. net profit margin, asset turnover and financial leverage.2020 Semester 2 – FIN2603 Study Group A firm can best improve its ROE by increasing its ... A. cash sales and decreasing liabilities. B. net profit and using assets needed for core business only. C. profitability, asset turnover and financial leverage. D. sales and decreasing expenditure. A firm’s cash inflow becomes more predictable as the ... A. current ratio increases. B. return on owners’ equity increases. C. current liabilities decrease. D. current assets decrease. A firm expects sales of R1 000 000, beginning inventory of R400 000 and ending inventory of R500 000. Purchases are expected to amount to 35% of sales. Operating expenses is expected to amount to R600 000. The EBIT is closest to ... A. R150 000. B. R250 000. C. R350 000. D. R450 000. A firm with a total asset turnover that is lower than industry standard but with a current ratio which meets industry standard must have excessive ... A. fixed assets. B. inventory. C. accounts receivable. D. debt. ABC Manufacturers Ltd has to raise an additional R1 000 000 in equity. The firm should ideally finance itself by means of ... A. R300 000 in cash, R100 000 in accounts receivable and R600 000 of inventory. B. R900 000 in debentures, 10 000 ordinary shares at a par value of 100 cents each and R10 000 in retained earnings. C. 500 000 ordinary shares at a par value of 200 cents each. D. R300 000 in debentures and 700 000 non-voting preference shares at 100 cents each. All of the following are examples of fixed assets, except ... A. vehicles. B. equipment. C. marketable securities. D. buildings. 2020 Semester 2 – FIN2603 Study Group An increase in sales revenue as a result of a credit sales is recorded by ... A. crediting cash. B. crediting sales. C. debiting cash. D. debiting sales. B and C Limited extend credit terms of 43 days to its customers. Its credit collection would likely be considered poor if its average collection period was ... A. 30 days. B. 36 days. C. 43 days. D. 45 days. Bestbuy Limited has fixed assets worth R400 000 and current assets worth R270 000. The company owes R250 000 on a mortgage bond and money owed to creditors amounts to R40 000. Owners’ equity equals ... A. R380 000 B. R420 000 C. R650 000 D. R670 000 Current liabilities can be viewed as ... A. debts that mature in one year or less. B. debts that mature in more than one year. C. sources of cash inflows. D. irrelevant in calculating net working capital. G and F Corporation extends credit terms of 45 days to its customers. Its credit collection would likely be considered poor if its average collection period was ... days. A. 30 B. 36 C. 45 D. 57 GVM Manufacturers Ltd has to raise an additional R1 200 000 in equity. The firm should ideally finance itself by means of ... A. R500 000 in cash, R100 000 in accounts receivable and R600 000 of inventory. B. R1 100 000 in debentures, 20 000 ordinary shares at a par value of 100 cents each and R80 000 in retained earnings. C. 600 000 ordinary shares at a par value of 200 cents each. D. R300 000 in debentures and 900 000 non-voting preference shares at 100 cents each. 2020 Semester 2 – FIN2603 Study Group If accounts receivable increase by R100, inventory increases by R200 and accounts payable increase by R400, net working capital would ... A. decrease by R300. B. increase by R300. C. decrease by R100. D. increase by R100. If accounts receivable increases by R300, inventory decreases by R100 and accounts payable increases by R200, net working capital would A. decrease by R200. B. increase by R200. C. increase by R100. D. remain unchanged. If accounts receivable increases by R400, inventory increases by R500 and accounts payable decreases by R200, net working capital would ... A. decrease by R1100. B. decrease by R 700. C. increase by R 700. D. increase by R1100. If accounts receivable increase by R500, inventory increases by R200 and accounts payable increase by R400, net working capital would ... A. decrease by R300. B. increase by R300. C. increase by R700. D. remain unchanged. If accounts receivable increase by R600, inventory increases by R100 and accounts payable increase by R400, net working capital would ... A. decrease by R300. B. increase by R300. C. increase by R700. D. remain unchanged. If accounts receivable increase by R900, inventory increases by R400 and accounts payable increase by R400, net working capital would ... A. decrease by R300. B. increase by R300. C. increase by R700. D. increase by R900. 2020 Semester 2 – FIN2603 Study Group If Beta Limited has cost of goods sold of R300 000 and inventory of R30 000, then the inventory turnover is ... and the average age of inventory is ... A. 36.5 ; 10.0 B. 10.0 ; 36.5 C. 36.0 ; 10.0 D. 10.0 ; 36.0 In general, a lending institution would consider a decrease in which of the following ratios to be positive news? A. Interest coverage B. Debt to total assets C. Return on assets D. Current ratio In the past year a firm received cash from clients amounting to R10 500. The firm paid creditors and employees an amount of R3 700. Interest paid amounted to R1 500. No dividends were paid out. The firm paid normal tax amounting to R700. The cash flow from operations amount to ... A. R1 700 B. R4 600 C. R5 300 D. R6 800 On the statement of financial position, fixed assets represent ... A. gross fixed assets at cost minus depreciation expense. B. gross fixed assets at market value minus depreciation expense. C. gross fixed assets at cost minus accumulated depreciation. D. gross fixed assets at market value minus accumulated depreciation. Operating profit is defined as ... A. gross profit minus operating expenses. B. sales revenue minus cost of goods sold. C. earnings before depreciation and taxes. D. sales revenue minus depreciation expenses. Pec Deck Limited has total liabilities of R600 000 and owner’s equity of R150 000. The company’s total assets are ... A. R450 000 B. R720 000 C. R750 000 D. R800 000 2020 Semester 2 – FIN2603 Study Group Sharewealth Limited has fixed assets worth R600 000 and current assets worth R240 000. The company owes R250 000 on a mortgage bond and money owed to creditors amounts to R100 000. Owners’ equity equals ... A. R380 000. B. R420 000. C. R490 000. D. R570 000. The basic sources of capital for an organisation include the following except ... A. preference shares. B. long-term debt. C. dividends. D. retained earnings. The best way in which a firm may improve its profitability without incurring additional expenses, would involve ... A. reducing expenditure on non-core business activities. B. employing fewer permanent staff and using contract workers during peak periods. C. increasing sales by means of improved marketing. D. selling all its non-core assets. The statement of comprehensive income measures ... and it is also known as ... A. revenue and gross profit; earnings-after-tax trial balance. B. gross profit, earnings before income and tax (EBIT) and net profit; Statement of financial performance. C. cost of goods sold and operating expenses; balance sheet. D. sales, EBIT and earnings-after-tax; cash flow statement. Vermaak & Associates Ltd has to raise an additional R1 000 000 in equity. The firm should ideally finance itself by means of ... A. R300 000 in cash, R1 00 000 in accounts receivable and R600 000 of inventory. B. R900 000 in debentures, 10 000 ordinary shares at a par value of 100 cents each and R10 000 in retained earnings. C. 500 000 ordinary shares at a par value of 200 cents each. D. R300 000 in debentures and 700 000 non-voting preference shares at 100 cents each. West Wing Limited has total liabilities of R500 000 and owner’s equity of R250 000. The company’s total assets are ... A. R250 000. B. R400 000. C. R750 000. D. R950 000. 2020 Semester 2 – FIN2603 Study Group Which one of the following is a major expense associated with issuing new ordinary shares. A. Underpricing B. Legal fees C. Registration fees D. Underwriting fees Which ratio is a measure of the speed with which various accounts are converted into sales and cash? A. Activity ratio B. Liquidity ratio C. Debt ratio D. Profitability ratio Which ratio is useful in evaluating credit and collection policies? A. Average payment period B. Current ratio C. Average collection period D. Current asset turnover Which statement is not correct with regards to financial accounting? A. Financial accounting is externally focused. B. Financial accounting is internally focused. C. Financial accounting is historical orientated. D. Financial accounting must follow externally imposed rules. With which type of funds would an organisation typically finance temporary current assets? A. Long-term debt B. Equity C. Preference shares D. Short-term debt Chapter 4: Profit planning and control ... costs are a function of time, not volume. A. Fixed financial B. Variable C. Fixed operating D. Semi-variable 2020 Semester 2 – FIN2603 Study Group ... costs are a function of volume, not time. A. Fixed financial B. Variable C. Fixed operating D. Semi-variable A company has fixed operating costs of R4 500, the selling price per unit is R12 and its variable cost per unit is R9. The company’s breakeven point is ... units. A. 1 000 B. 1 333 C. 1 500 D. 2 500 A company has fixed operating costs of R10 000. Its products are sold at R15 per unit and the variable cost per unit is R5. Calculate the company’s breakeven point in units. A. 1 000 units B. 10 000 units C. 15 000 units D. 20 000 units A company has fixed operating costs of R15 000. Products are sold at R15 per unit and the variable cost per unit is R6. Calculate the company’s breakeven point in rand. A. R 1 111 B. R 1 667 C. R29 000 D. R1 363 A company has fixed operating costs of R60 000, the selling price per unit is R13 and its variable cost per units is R9. Calculate the company’s breakeven point. A. 15 000 units B. 24 000 units C. 29 000 units D. 39 500 units A Swiss based company sells watches for R50 each. Variable costs per watch amounts to R30 and the company has fixed operating costs of R75 000. Calculate the company’s breakeven point in units. A. 938 units B. 1 500 units C. 2 500 units D. 3 750 units 2020 Semester 2 – FIN2603 Study Group ABC Limited has fixed costs of R2 000 000. The company’s products are sold at R 2000 per unit, while variable cost amounts to R800 per unit. Calculate the company’s breakeven point in units. A. 1 000 units B. 1 333 units C. 1 500 units D. 1 667 units All Brown Limited sold 10 000 units with a total fixed costs of R2 000 000 for the year. Their product is sold at R2 000 per unit and the variable costs amounts to R500 per unit. Calculate the company’s breakeven point in units. A. 1 000 B. 1 333 C. 2 000 D. 2 500 At the operating breakeven point, ... equals zero. A. variable cost B. fixed cost C. net profit after tax D. earnings before interest and tax (EBIT) Hackleys Ltd. sold 10 000 units for the current financial year. Total fixed costs for the year amounted to R2 000 000. The selling price per unit is R2 000, whereas the variable cost per unit is R500. Calculate the marginal income for the year. A. R10 000 000 B. R12 000 000 C. R15 000 000 D. R17 000 000 If a company expects to sell 100 000 units of tubes in a year, what will the company’s margin of safety ratio be if the company’s breakeven volume is 75 000 units? A. 25% B. 50% C. 75% D. 125% If a company expects to sell 400 000 units of canned meat in a year. What will the company’s margin of safety ratio be if the company’s breakeven volume is 285 000 units? A. 29% B. 40% C. 71% D. 140% 2020 Semester 2 – FIN2603 Study Group Kenloggs Limited sold 10 000 units with a total fixed costs of R2 000 000 for the year. Each unit is sold at a price of R2 000 with a variable cost of R500 per unit. Calculate Kenloggs Limited’s breakeven point in Rand. A. R2 000 000 B. R3 000 000 C. R2 666 666 D. R4 000 000 Operating profit is defined as ... A. gross profit minus operating expenses. B. sales revenue minus cost of goods sold. C. earnings before depreciation and taxes. D. sales revenue minus depreciation expense. Which one of the following costs are not an example of a variable cost? A. Packaging materials B. Rent-expense C. Shipping costs D. Raw materials Which of the following statements are not true with regards to management accounting? A. Management accounting is internally focused. B. Management accounting is future-orientated. C. Management accounting is historical orientated. D. Management accounting is multidisciplinary. Which type of budget indicates expected expenses for line- items such as buildings, machinery and equipment? A. Cash budget B. Pro forma balance sheet C. Capital budget D. Pro forma income statement 2020 Semester 2 – FIN2603 Study Group Chapter 5: The time value of money At what annual interest rate must a single amount of R5 000 be invested for 5 years to yield approximately R7 500? A. 7.20% B. 8.45% C. 9.86% D. 10.76% Ben Johnson has arranged for a 60-day loan at an annual interest rate of 7.5% per annum. If the loan amount is R1 000 000, how much interest will Mr Johnson pay in rand terms? (Assume a 360-day year.) A. R0 B. R12 500 C. R25 000 D. R75 000 Calculate the difference between the following two investment proposals: (a) R1 401.82 invested annually for five successive years at 9% per annum compound interest. (b) R5 209.22 invested for a period five years at 10% per annum compound interest. A. R0 B. R36.10 C. R80.25 D. R100.35 Calculate the future value (FV) of R10 000 invested for 5 years at an interest rate of 7%, interest compounded semi-annually. A. R14 026 B. R14 106 C. R14 900 D. R16 234 Calculate the future value (FV) of R15 000 invested for six years at an interest rate of 8%, compounded monthly. A. R14 026 B. R23 803 C. R24 260 D. R26 734 2020 Semester 2 – FIN2603 Study Group Calculate the future value (FV) of R15 000 invested for six years at an interest rate of 8%, compounded semi-annually. A. R14 026 B. R14 106 C. R24 015 D. R26 734 Calculate the future value (FV) of R35 000 invested for six years at an interest rate of 8%, compounded semi-annually. A. R14 026 B. R44 106 C. R56 036 D. R76 734 Calculate the future value (FV) of R35 000 invested for six years at an interest rate of 8%, compounded semi-annually. A. R14 026 B. R44 106 C. R56 036 D. R76 734 Calculate the growth rate of the following stream of cash flows: Year Cash flow 2013 R 1 700 2012 R 1 400 2011 R 1 200 2010 R 1 000 A. 13% B. 14% C. 19% D. 23% Calculate the growth rate of the following stream of cash flows: Year Cash flow 2013 R 3 600 2012 R 3 000 2011 R 1 900 2010 R 1 000 A. 23% B. 26% C. 43%2020 Semester 2 – FIN2603 Study Group D. 53% Calculate the growth rate of the following stream of cash flows: Year Cash flow 2017 R 4 300 2016 R 3 000 2015 R 1 900 2014 R 1 700 A. 23% B. 26% C. 33% D. 36% Calculate the growth rate of the following stream of cash flows: Year Cash flow 2013 R 4 600 2012 R 3 000 2011 R 1 900 2010 R 1 800 A. 23% B. 37% C. 43% D. 53% Calculate the growth rate of the following stream of cash flows: Year Cash flow 2017 R 4 300 2016 R 3 000 2015 R 1 900 2014 R 1 700 A. 23% B. 26% C. 33% D. 36% 2020 Semester 2 – FIN2603 Study Group Charles, the manager of an export company, wishes to replace a machine four years from now, with a new machine that will cost R150 000 in four years time. If equal end-of-the-year deposits will be made into an account paying annual interest of 10 per cent, calculate the size of the each deposit. A. R 23 535.24 B. R 29 382.38 C. R 32 320.62 D. R 45 345.78 Calculate the present value of the following stream of cash flows: Cash flow 1 R18 000 Cash flow 2 R21 000 Cash flow 3 R20 000 Cash flow 4 R16 000 Assume a discount rate of 6% and work to the nearest Rand. A. R59 407 B. R65 137 C. R69 045 D. R72 319 Calculate the present value (PV) of R100 000 received 9 years from today at an interest rate of 12%. A. R27 895 B. R36 061 C. R37 980 D. R43 998 Calculate the present value (PV) of R100 000 received nine years from today at an interest rate of 12%. Interest is compounded monthly. A. R27 895 B. R34 142 C. R37 980 D. R43 998 Calculate the present value (PV) of R250 000 received five years from today at an interest rate of 13%. A. R133 444 B. R135 690 C. R137 690 D. R147 890 2020 Semester 2 – FIN2603 Study Group Find the present value of the following stream of cash flows by assuming that the organisation has an opportunity cost of 11%. Years 1–2: R 20 000 Years 3–8: R 30 000 A. R 71 203.41 B. R100 268.41 C. R137 258.45 D. R152 356.88 Find the present value of the following stream of cash flows by assuming that the organisation has an opportunity cost of 11%. Years 1–3 : R25 000 Years 4–7 : R50 000 A. R 71 203.41 B. R100 268.41 C. R155 268.41 D. R174 516.94 Find the present value of the following stream of cash flows by assuming that the organisation has an opportunity cost of 12%. Years 1–3: R23 000 Years 4–7: R38 000 A. R 71 203.41 B. R100 268.41 C. R122 268.41 D. R137 395.28 Find the present value of the following stream of cash flows by assuming that the organisation has an opportunity cost of 15%. Year 1-3: (R) 25 000 Year 4-7: (R) 37 000 A. R 63 268.41 B. R100 268.41 C. R125 268.41 D. R126 536.83 How much should Alfred invest today at 9% interest per annum, compounded quarterly, to be able to buy a house worth R2 500 000 six years from today? A. R 672 971.33 B. R1 115 564.17 C. R1 465 616.71 D. R1 954 322.192020 Semester 2 – FIN2603 Study Group How much should be invested today at 8% interest p.a., compounded quarterly, to be able to buy a house worth R1000 000, 5 years from today? A. R672 971.33 B. R675 564.17 C. R680 583.19 D. R690 778.19 How much should Conner invest today at 9% interest per annum, compounded quarterly, to be able to buy a house worth R2 500 000 six years from today? A. R 672 971.33 B. R1 115 564.17 C. R1 465 616.71 D. R1 954 322.19 If Abraham invests R9 000 at the beginning of each year at an interest rate of 6.5% over a six-year period, the future value of the investment will be ... A. R58 687.43 B. R60 000.00 C. R63 382.42 D. R67 705.83 If Brett invests R5 000 at the beginning of each year at an interest rate of 8% over a ten-year period, the future value of the investment would be ... A. R58 687.43 B. R60 000.00 C. R78 227.44 D. R81 000.00 If Conrad invests R2 000 at the beginning of each year at an interest rate of 10 per cent over five year period, the future value of the investment would be ... A. R 6 105.10. B. R 6 715.61. C. R12 210.20. D. R13 431.22. 2020 Semester 2 – FIN2603 Study Group If Joel invests R50 000 in an unit trust offering a rate of return of 17% per annum, calculate how long it will take for the investment to reach R200 000. A. 8.80 years B. 10.80 years C. 11.40 years D. 13.50 years If John invests R20 000 in a unit trust offering a rate of return of 16% per annum, calculate how long it will take for the investment to reach R100 000. A. 10 years B. 11 years C. 14 years D. 15 years If John invests R50 000 in a unit trust offering a rate of return of 17% per annum, calculate how long it will take for the investment to reach R200 000. A. 9 years B. 10 years C. 11 years D. 13 years If John invests R20 000 in a unit trust offering a rate of return of 16% per annum, calculate how long it will take for the investment to reach R100 000. A. 10 years B. 11 years C. 14 years D. 15 years If R45 000 was invested in a fund offering a rate of 14% per year, approximately how many years will it take for the investment to reach R100 000? A. four years B. five years C. six years D. seven years 2020 Semester 2 – FIN2603 Study Group If R50 000 was invested in a fund offering a rate of 15% per year, approximately how many years will it take for the investment to reach R100 000? A. 4 years B. 5 years C. 7 years D. 13 years If you were to borrow R200 000 over three years at an annual interest rate of 8%, what would the repayment on the principle amount of the loan be in year 2? A. R 66 535.24 B. R 71 858.06 C. R 77 606.70 D. R112 153.85 If you were to invest R150 000 in a savings account that earns 12% interest compounded semi-annually today, how much would you have in the account at the end of a 10-year period? A. R 268 627.16 B. R 465 877.23 C. R 481 070.32 D. R1 446 943.96 If you were to take out a loan of R230 000 today at an annual interest rate of 9% and you have to pay off the loan over five years, how much will your equal annual payments to repay the loan be? A. R 4 774.42 B. R20 700.00 C. R38 431.27 D. R59 131.27 Jefferson, the export manager of an international company, wishes to replace a machine five years from now with a new machine that will cost R500 000 in five years' time. If equal end-of-year deposits are made into an account paying an annual interest of 9%, calculate the size of each deposit. A. R23 535.24 B. R49 382.38 C. R83 546.23 D. R95 345.78 2020 Semester 2 – FIN2603 Study Group Johnty, the financial manager of an international company, wishes to replace a machine five years from now with a new machine that will cost R700 000 in six years' time. If equal end-of-year deposits are made into an account paying an annual interest of 11%, calculate the size of each deposit. A. R23 535.24 B. R49 382.38 C. R88 463.60 D. R95 345.78 Mr Parker has arranged for a 60-day loan at an annual interest rate of 9.5%. If the loan amount is R1 000 000, how much interest will Mr Parker pay in rand terms? (Assume a 360- day year.) A. R12 500 B. R15 833 C. R23 556 D. R45 000 R2 000 is invested at 7% for the first year, 8% for the second year and 9% for the third year, compounded annually. The future value at the end of the third year is closest to ... A. R2 519 B. R2 690 C. R2 794 D. R2 849 The present value of the cash flows of an investment is expected to total R180 000. The profitability index is calculated at 1.40. Calculate the initial investment. A. R127 562.43 B. R128 571.43 C. R142 857.14 D. R147 857.14 William, the export manager of an international company, wishes to replace a machine five years from now with a new machine that will cost R1 000 000 in five years' time. If equal end-of-year deposits are made into an account paying an interest of 9% per annum, calculate the size of each deposit. A. R 23 535.24 B. R 89 382.38 C. R 123 546.23 D. R 167 092.45 2020 Semester 2 – FIN2603 Study Group What amount must be invested annually (at the beginning of each year) for 5 successive years at 8% p.a. compounded interest in order to yield R500 000? A. R78 915.03 B. R82 047.05 C. R89 383.21 D. R92 000.44 What amount would you have to invest today at an annual interest rate of 11% in order to have R125 000 saved in 18 years’ time? A. R 19 102.77 B. R 20 239.88 C. R771 990.74 D. R817 944.11 What is the growth rate of the following streams of cash flow? Year Cash flow 2013 R 8 567 2012 R 7 489 2011 R 6 589 2010 R 5 656 A. 10.94% B. 14.84% C. 16.50% D. 51.47% What is the future value of R20 000 invested today at an annual interest rate of 14% over a period of 16 years, assuming that interest is compounded semi-annually? A. R144 115.19 B. R162 744.99 C. R174 305.42 D. R180 805.81 What is the present value of an annuity that pays R12 500 in five equal annual payments assuming a discount rate of 7%? A. R 8 912.33 B. R51 252.47 C. R52 606.24 D. R72 329.67 2020 Semester 2 – FIN2603 Study Group What is the present value of an annuity that pays R25 000 in seven equal annual payments assuming a discount rate of 13%? A. R 80 626.52 B. R 94 385.61 C. R 110 565.26 D. R 124 938.75 What would R12 500 invested today at 8% compound interest per annum be worth in six years’ time? Round off your answer to the nearest Rand. A. R 7 843 B. R 7 877 C. R19 836 D. R19 923 What would R15 000, invested today at 9% compound interest per annum be worth in seven years’ time? Round your answer off to the nearest rand. A. R 8 206 B. R 9 450 C. R 27 421 D. R 32 578 You invest R1 000 annually (at the end of each year) for 5 successive years in a savings account at 9% p.a. compound interest. At the end of the fifth year you withdraw R984, 71 and the balance is invested at 13% interest p.a., compounded semi-annually for four years. The end value of the investment is closest to ... A. R5 000 B. R6 655 C. R8 275 D. R9 655 2020 Semester 2 – FIN2603 Study Group Chapter 6: Capital budgeting Bigbuy Ltd has made an initial investment of R500 000 on a new project. The firm’s cost of capital is 8%. The investment is expected to generate the following cash inflows: Year 1: R100 000 Year 2: R120 000 Year 3: R 80 000 Year 4: R140 00 0 Year 5: R 30 000 The profitability index (PI) is...thus the investment should ... A. 0.7646; be undertaken. B. 0.7646; not be undertaken. C. 1.3079; be undertaken. D. 1.3079; not be undertaken. Blue Bay Ltd. has made an initial investment of R 500 000 in a new project. The firm’s cost of capital is 12%. The investment is expected to generate the following cash inflows over the next five years: Year 1: R 50 000 Year 2: R 60 000 Year 3: R 150 000 Year 4: R 140 000 Year 5: R500 000 The profitability index (PI) is ... ; therefore, the investment should ... A. 1.14; not be undertaken. B. 1.14; be undertaken. C. 1.29; be undertaken. D. 1.29; not be undertaken. If the cost of capital is greater than the IRR, the financial manager of the organisation should reject the intended project. o True o False If the IRR is smaller than the cost of capital (k) the project will not add value to the organisation. o True o False If the PI is greater than one, the project will not add value to the organisation. o True o False 2020 Semester 2 – FIN2603 Study Group Green Oak Ltd has made an initial investment of R500 000 in a new project. The firm’s cost of capital is 12%. The investment is expected to generate the following cash inflows over the next five years: Year 1: R 50 000 Year 2: R 60 000 Year 3: R150 000 Year 4: R140 000 Year 5: R300 000 The profitability index (PI) is ...; therefore, the investment should ... A. 0.92; be undertaken. B. 0.92; not be undertaken. C. 1.09; be undertaken. D. 1.09; not be undertaken. Metropolitan has a cost of capital of 13% and it is evaluating three capital projects. The internal rates of return are as follows: Project IRR 1 12% 2 15% 3 13% Metropolitan should ... A. accept project 2 and reject projects 1 and 3. B. accept projects 2 and 3, and reject project 1. C. accept project 1 and reject projects 2 and 3. D. accept project 3 and reject projects 1 and 2. On a purely theoretical basis, the IRR approach is the best to evaluate the feasibility of a project. o True o False Renmax Ltd has made an initial investment of R1000 000 in a new project. The firm’s cost of capital is 13%. The investment is expected to generate the following cash inflows over the next five years: Year 1: R 50 000 Year 2: R 60 000 Year 3: R 70 000 Year 4: R400 000 Year 5: R500 000 The profitability index (PI) is ... therefore, the investment should ... A. 0.66; be undertaken. B. 0.66; not be undertaken. C. 1.52; be undertaken. D. 1.52; not be undertaken. 2020 Semester 2 – FIN2603 Study Group The financial manager is evaluating a proposal for a new project with the following cash flows: Year Net cash flows 0 -R 100 000 1 R 550 000 2 R 350 000 3 R 90 000 The payback period is ... A. two years. B. between one and two years. C. three years. D. more than three years. The financial manager is evaluating a proposal of a new project which has the following cash flows: Year Net cash flows Year Net cash flows 0 -R 100 000 1 R 35 000 2 R 35 000 3 R 25 000 The payback period is ... A. 2 years. B. between 1 and 2 years. C. 3 years. D. more than 3 years. The financial manager is evaluating a proposal for a new project with the following cash flows: Year Net cash flows 0 -R 100 000 1 R 550 000 2 R 350 000 3 R 400 000 The payback period is ... A. one year. B. two years. C. between one and two years. D. between two and three years. 2020 Semester 2 – FIN2603 Study Group The financial manager is evaluating a proposal for a new project with the following cash flows: Year Net cash flows 0 -R 100 000 1 R 550 000 2 R 350 000 3 R 90 000 The payback period is ... A. two years. B. between one and two years. C. three years. D. more than three years. The financial manager is evaluating a proposal for a new project with the following cash flows: Year Net cash flows 0 -R2 000 000 1 R 550 000 2 R 350 000 3 R1 000 000 The payback period is ... A. two years. B. between one and two years. C. three years. D. more than three years. The minimum return that must be earned on a project in order to leave the firm’s value unchanged is the … A. compound rate. B. interest rate. C. discount rate. D. internal rate of return. The PI and NPV approaches give different solutions to accept-reject decisions. o True o False 2020 Semester 2 – FIN2603 Study Group The present value of the cash flows of an investment is expected to total R180 000. The profitability index is calculated at 1. 40. Calculate the initial investment. A. R127 562.43 B. R128 571.43 C. R180 000.00 D. R252 000.00 The present value of the cash flows of an investment is expected to total R180 000. The profitability index is calculated at 1.50. Calculate the initial investment. A. R120 000 B. R130 000 C. R140 000 D. R150 000 The present value of the cash flows of an investment is expected to total R250 000. The profitability index is calculated at 1.40. Calculate the initial investment. A. R127 562.43 B. R148 571.43 C. R162 857.14 D. R178 571.43 The profitability index is also called the benefit-cost ratio o True o False Chapter 7: Financing _____________ is the ability to adjust sources of funds upwards or downwards in response to major changes in needs of funds. Answer Key: Flexibility ___________refers to the compatibility of the types of funds used in relation to the nature of the assets financed. A company has financed 45% of its assets through a 11% after-tax cost of debt loan. The remainder of its assets are financed through equity. The firm’s required return on equity is 16%. What is the company's weighted average cost of capital (WACC)? A. 11.25% B. 13.75% C. 28.50% D. 43.56% A company’s cost of capital is influenced by ... A. the current ratio. B. par value of ordinary shares. C. capital structure. D. net income. A firm has a loan with an interest rate of 12%. The firm is subject to a tax rate of 28%. What is the firm’s after tax cost of debt? A. 3.36% B. 8.64% C. 11.28% D. 12.72% A firm has a loan with an interest rate of 15%. The firm is subject to a tax rate of 30%. What is the firm’s after-tax cost of debt? A. 4.5% B. 10.5% C. 15.0% D. 22.5% A tax adjustment must be made in determining the cost of … A. long-term debt. B. common shares. C. preferred shares. D. retained earnings. Characteristic of the industry include ... A. Competitive forces B. Seasonal variations C. Cyclical variations D. All of the above 2020 Semester 2 – FIN2603 Study Group Customer care Limited has determined its optimal capital structure, which comprises the following: Form of capitalWeightAfter-tax costLong-term debt40%6%Preference shares20%10%Ordinary shares40%9% The weighted average cost of capital is ... A. 5.3%. B. 6.2%. C. 8.0%. D. 9.1%. Debt is generally the least expensive source of capital. This is primarily due to … A. fixed interest payments. B. its position in the priority of claims on assets and earnings in the event of liquidation. C. the tax deductibility of interest payments. D. the secured nature of a debt obligation. Equity has a maturity date of 15 years. o True o False Long-term debt is scheduled to mature in a period exceeding 5 years. o True o False Morningstar Ltd. has determined its optimal capital structure, which comprises the following: Form of capital Weight After-tax cost Long-term debt 60% 4% Preference shares 20% 13% Ordinary shares 20% 10% The weighted average cost of capital is ... A. 5.3% B. 7.0% C. 8.4% D. 9.1% 2020 Semester 2 – FIN2603 Study Group Owners’ equity = Total assets – Liabilities o True o False PPT Ltd. has determined its optimal capital structure, which comprises the following: Form of capital Weight After-tax cost Long-term debt 70% 6% Preference shares 20% 13% Ordinary shares 10% 9% The weighted average cost of capital is ... A. 5.3% B. 7.7% C. 8.4% D. 9.1% Risetoshine Ltd. has determined its optimal capital structure, which comprises the following: Form of capitalWeightAfter-tax cost Long-term debt60%5%Preference shares15%13%Ordinary shares25%10% The weighted average cost of capital is ... A. 7.45% B. 8.35% C. 9.65% D. 11.43% Short-term debt is scheduled to mature within a 2 year period. o True o False The after-tax cost of debt for a firm, which has a marginal tax rate of 28% is correctly calculated at 6%. Calculate the before-tax cost of debt. A. 6.0% B. 7.7% C. 8.3% D. 10.0% 2020 Semester 2 – FIN2603 Study Group The after-tax cost of debt for a firm which has a marginal tax rate of 40%, is 6%. Calculate the before-tax cost of debt. A. 6.0% B. 8.1% C. 9.2% D. 10.0% The before-tax cost of debt for a firm, which has a 20% marginal tax rate, is correctly calculated at 15%. Calculate the after-tax cost of debt. A. 15% B. 13% C. 12% D. 11% The before-tax cost of debt for a firm which has a 35% marginal tax rate is correctly calculated at 12%. Calculate the after-tax cost of debt. A. 7.8% B. 8.4% C. 9.6% D. 12.0% The before-tax cost of debt for a firm, which has a 45% marginal tax rate, is correctly calculated at 11%. Calculate the after-tax cost of debt. A. 4.20% B. 6.05% C. 9.60% D. 12.06% The creditors of a company have voting rights with regards to the appointment of the board of directors. o True o False 2020 Semester 2 – FIN2603 Study Group The ordinary shareholders of a company receive their distribution of residual income before the company makes payments to preference shareholders. o True o False The value of the firm can be increased by lowering the firm's cost of capital. o True o False Total assets = Owners’ equity - Liabilities o True o False Chapter 8: The management of working capital _________________ reflect the minimum requirements for extending credit to a customer. redit standards A company changing its credit terms for customers from 2/15 net 60, to 3/10 net 30, will likely experience ... A. higher net income. B. a decrease of cash in hand. C. an increase in the average collection period. D. a decrease in the average collection period. A company has a cash conversion cycle of 50 days. Annual outlays are R8 million and the cost of negotiated financing is 8 %. Calculate the annual savings, if the company reduces its average age of inventory by 10 days. Assume 360 days per year. A. R 15 679.20 B. R 17 777.78 C. R320 000.67 D. R640 000.67 2020 Semester 2 – FIN2603 Study Group A company has a cash conversion cycle of 50 days. Annual outlays are R9 million and the cost of negotiated financing is 9%. Calculate its annual savings if the company reduces its average age of inventory by 15 days. Assume 360 days per year. A. R15 679 B. R37 778 C. R87 750 D. R99 500 A company has a cash conversion cycle of 50 days. Annual outlays are R10 million and the cost of negotiated financing is 9%. Calculate its annual savings if the company reduces its average age of inventory by 15 days. Assume 360 days per year. A. R15 679 B. R17 778 C. R37 500 D. R52 500 A company has a cash conversion cycle of 50 days. Annual outlays are R10 million and the cost of negotiated financing is 9%. Calculate its annual savings if the company reduces its average age of inventory by 15 days. Assume 360 days per year. A. R 15 679 B. R 37 500 C. R 87 500 D. R125 000 A company increasing its credit terms for customers from 2/15 net 60 to 2/20 net 90 will likely experience ... A. higher net income. B. an increase of cash in hand. C. an increase in the average collection period. D. a decrease in the average collection period. A firm has a cash conversion cycle of 60 days, an average payment period of 30 days and an average collection period of 60 days. What is the firm’s average age of inventory? A. –90 days B. 0 days C. 30 days D. 150 days 2020 Semester 2 – FIN2603 Study Group A firm is offered payment terms of 1/10 net 30 by a supplier. Calculate the cost of giving up the cash discount. Assume a 365-day year. A. 12.00% B. 12.30% C. 18.43% D. 36.87% A firm is offered payment terms of 3/15 net 60 by a supplier. Calculate the cost of giving up the cash discount. Assume a 365 day year. A. 15.05% B. 18.81% C. 25.09% D. 113.00% A firm with a cash conversion cycle of 40 days can stretch its average payment period from 15 days to 20 days. This will result in a/an ... A. decrease of 5 days in the cash conversion cycle. B. increase of 5 days in the cash conversion cycle. C. decrease of 20 days in the cash conversion cycle. D. increase of 20 days in the cash conversion cycle. A firm with a cash conversion cycle of 50 days can stretch its average payment period from 15 days to 30 days. This will result in a/an ... A. decrease of 15 days in the cash conversion cycle. B. increase of 10 days in the cash conversion cycle. C. decrease of 30 days in the cash conversion cycle. D. increase of 15 days in the cash conversion cycle. A firm with a cash conversion cycle of 60 days can stretch its average payment period from 20 days to 30 days. This will result in a/an ... A. decrease of 10 days in the cash conversion cycle. B. increase of 10 days in the cash conversion cycle. C. decrease of 30 days in the cash conversion cycle. D. increase of 30 days in the cash conversion cycle. A firm with a cash conversion cycle of 80 days can stretch its average payment period from 20 days to 30 days. This will result in a/an ... A. decrease of 10 days in the cash conversion cycle. B. increase of 10 days in the cash conversion cycle. C. decrease of 30 days in the cash conversion cycle.2020 Semester 2 – FIN2603 Study Group D. increase of 15 days in the cash conversion cycle. A mining company uses 1600 litres of petrol per day for its current mining operations. Mr Burke, the financial analyst, has estimated that the mine will increase its current operations and therefore the petrol consumption will increase by 10% for the 2018 financial year. It takes four days from placing the order until the delivery of petrol is made. Calculate the reorder point for the 2018 financial year. A. 1600 litres B. 6400 litres C. 7040 litres D. 8340 litres ABC Limited purchased raw materials on account and paid for them within 30 days. The raw materials were used in the manufacturing of finished goods that were sold on account 100 days after the raw materials had been purchased. The customer paid for the finished goods 60 days later. Calculate the company’s cash conversion cycle. A. 10 days B. 70 days C. 130 days D. 190 days C and J Limited extend credit terms of 36 days to its customers. Its credit collection would likely be considered poor if its average collection period was ... A. 35 days. B. 36 days. C. 39 days. D. 0 days. Calculate the EOQ given the following information: 18 506 units used annually, purchased at R55 per unit. Order cost is R336 per order. Carrying cost is 9% of inventory value. A. 1 585 units B. 1 599 units C. 1 614 units D. 1 633 units Calculate the EOQ given the following information: 18 506 units used annually, purchased at R55 per unit. Order cost is R336 per order. Carrying cost is 9% of inventory value. A. 1 585 units B. 1 599 units2020 Semester 2 – FIN2603 Study Group C. 1 614 units D. 1 633 units Calculate the EOQ given the following information: 19 000 units used annually, purchased at R60 per unit. Order cost is R240 per order. Carrying cost is 9% of inventory value. A. 1 300 units B. 1 400 units C. 1 500 units D. 1 600 units Calculate the EOQ given the following information: 19 000 units used annually, purchased at R60 per unit. Order cost is R240 per order. Carrying cost is 9% of inventory value. A. 1 300 units B. 1 400 units C. 1 500 units D. 1 600 units Calculate the EOQ based on the following information: 21 000 units used annually, purchased at R65 per unit. Order cost is R340 per order. Carrying cost is 9% of inventory value. A. 1 562 units B. 1 599 units C. 1 614 units D. 1 633 units Calculate the economic order quantity given the following information: 1 600 units used annually. Ordering costs amount to R210 per order. Carrying costs are R180 per unit per year. A. 4 units B. 43 units C. 52 units D. 61 units Credit terms of 3/10 net 30 are set for a business. These terms imply ... A. a 3% discount if paid within 30 days; otherwise, the balance is due in 30 days. B. that the bond must be amortised before 3 October 2030. C. that the lease agreement expires on 10 March 2030.2020 Semester 2 – FIN2603 Study Group D. a 3% discount if paid within 10 days; otherwise, the balance is due in 30 days. Credit terms of 3/11 net 30 are set for a business. These terms imply ... A. a 3% discount if paid within 11 days; otherwise, the balance is due in 30 days. B. that the bond must be amortised before 3 November 2030. C. that the lease agreement expires on 3 November 2030. D. a 3% discount if paid within 30 days; otherwise, the balance is due in 11 to 30 days. During the past year a firm received cash from clients amounting to R11 000. The firm paid creditors and employees an amount of R3 900. Interest paid amounted to R1 200. No dividends were paid out. The firm paid normal tax amounting to R500. The cash flow from operations amounts to ... A. R7 100. B. R4 500. C. R4 600. D. R5 400. If accounts receivable increases by R300, inventory increases by R600 and accounts payable increases by R200, net working capital would ... A. decrease by R1 100. B. decrease by R700. C. increase by R700. D. increase by R1 100. If it takes seven days from placing an order until stock is delivered and a firm sells 725 units a day, what is the firms reorder point? A. 1 104 units B. 2 725 units C. 3 732 units D. 5 075 units Mr Hamilton has arranged for a 90-day loan at an annual rate of interest of 8%. If the loan amount is R1000 000, how much interest in rand terms will Megatron pay? (Assume a 365- day year) A. R0 B. R19 726.03 C. R20 000.00 D. R80 000.00 2020 Semester 2 – FIN2603 Study Group Mr Parker has arranged for a 60-day loan at an annual interest rate of 9.5%. If the loan amount is R1 000 000, how much interest will Mr Parker pay in rand terms? (Assume a 360- day year) Mr Parker has arranged for a 60-day loan at an annual interest rate of 9.5%. If the loan amount is R1 000 000, how much interest will Mr Parker pay in rand terms? (Assume a 360-day year) A. R12 500 B. R15 833 C. R23 556 D. R45 000 , B The conversion of current assets from inventory into receivables and into cash provides the … of cash used to pay the current liabilities, which represents a (an) … of cash. A. outflow; inflow B. use; source C. source; use D. inflow; outflow The cost of giving up cash discount under the terms of sale 2/10 net 35 is ... (assume a 360-day year) A. 8.14%. B. 14.70%. C. 20.99%. D. 29.39%. The cost of a giving-up-cash discount under the terms of sale 3/10 net 30 is ... (Assume a 360-day year.) A. 37.11% B. 55.67% C. 112.76% D. 118.68% The cost of a giving up a cash discount under the terms of sale 4/10 net 30 is ... (Assume a 360-day year) A. 37.11% B. 55.67% C. 75.00% D. 111.34% 2020 Semester 2 – FIN2603 Study Group The cost of a giving-up-cash discount under the terms of sale 4/10 net 35 is ... (Assume a 360-day year.) A. 40.11% B. 60.00% C. 78.00% D. 99.34% Which of the following are not motives for holding cash and marketable security balances. A. transaction motive B. compensating balances C. competative motive D. speculative motive Which one of the following statements is incorrect? A. Relaxation of credit standards will cause an increase in sales volume. B. Relaxation of credit standards will cause an increase in accounts receivable. C. Relaxation of credit standards will cause a decrease in bad debt costs. D. Tightening of credit standards will cause a decrease in bad debt costs. ImyModules ! · myAdmin I • CCC• CC,, c,cc ••• ••••••••,] FIN2603-19-S2 / Online Assessment COnline Assessment Online Assessment 1 Assignment_2_2019 RETURN TO ASSESSMENT LIST Part 1 of 5 - Confidentiality agreement Question 1 of 21 my1v1oau1es: r-1NLou.F1l:J-;:::,L: unune Assessmem 0.0 Points I )CRika Hirselman with student number )(62256122 confirm that this is my own, true and honest 0.0 Points work. I did not copy my assignment from another student's work. Part 2 of 5 - Section 1 3.0 Points Question 2 of 21 Any organisation that is managed in accordance with business principles should be able to ensure 1.0 Points its survival because it will ... • A. maximise its revenue from sales and control its expenses. • B. plan its cash inflows and outflows by means of a cash budget. • C. keep its cost of financing as low as possible. • ~ D. undertake all the above-mentioned financial measures. Question 3 of 21 What is the main function of a financial manager? • A. To prevent bad debts. • )C B. To ensure liquidity and solvency. • C. To increase the value of ordinary shares. • D. To earn returns greater than those of the competitors. Question 4 of 21 httncd/m\/mnrl, ,looa 11nioa" "" 7"/nnrt,,l/oaito/l=ll\l?Rfl"l-1 Q_~?/tnnl/r<;AAQh<;A..rlLlrl7-L17fo_h?fr_farlhLlfa 1"l<;h,1/id/inrlov/m,,inlnrlov 1.0 Points 1/""IU/LHLU"l:::t myiv1oau1es: r-1NLt>U,Fl:::t-.:>L: un11ne Assessmem The long-term financial goal of the firm may be achieved by ... • A. maximising revenue and minimising expenses. • B. minimising the cost of capital and maximising the internal rate of return (IRR). • X C. maximising the assets relative to the liabilities. • D. accelerating cash inflows. Part 3 of 5 - Section 2 Question 5 of 21 On the statement of financial position, fixed assets represent ... • X A. gross fixed assets at cost minus depreciation expense. • B. gross fixed assets at market value minus depreciation expense. • C. gross fixed assets at cost minus accumulated depreciation. • D. gross fixed assets at market value minus accumulated depreciation. Question 6 of 21 1.0 Points 10.0 Points 1.0 Points A company wishes to raise funds without lessening the control of current owners. Which source(s) 1.0 Points of capital would be the most appropriate for the company? • A. Share issue • B. Debt • C. Preference shares • ~ D. Options b and c Question 7 of 21 Which ratio is useful in evaluating credit and collection policies? • X A. Average payment period • B. Current ratio • C. Average collection period • D. Current asset turnover httnc,-//m"m"rl11l<:>c: 11nic:,:, "" 7,:,/n"rt,:,l/c:it<:>/J:"ll\l?f'\()':\_1 Q_C::?/t""l/,-<:;,:\l'\Qh<:;A...rl'1rl7...d.7fa_h?f,-_fa,ih;1fa1 ':\<:;h,1/ic:f/inrl<:>v/m,:,inlnrl<:>v 1.0 Points ?/"my1V1oau1es: r-11'\ILOU.j-·1::1-;:,L: un11ne Assessmem Question 8 of 21 ~f accounts receivable increase by R900, inventory increases by R400 and accounts payable increase by R400, net working capital would ... • A. decrease by R300. • B. increase by R300. • C. increase by R700. • ~ D. increase by R900. Question 9 of 21 A current ratio of 4: 1 may indicate that the firm has too much ... • A. cash. • B. inventory. • C. accounts receivable. • ~ D. all of the above. Question 10 of 21 If accounts receivable increase by R600, inventory increases by R100 and accounts payable increase by R400, net working capital would ... • )( A. decrease by R300. • B. increase by R300. • C. increase by R700. • D. remain unchanged. Question 11 of 21 The basic sources of capital for an organisation include the following except ... • A. preference shares. • B. long-term debt. • ~ C. dividends. • D. retained earnings. httnc::·//m\/mnr1 11 Joc::: 11nic::~ ~r 7 ~/nnrt~l/c::ito/~lf\l?li;()~-1Q_~?/tnnl/rt;;~~Qht:;A..ri.1rl7-c17fo_h?fr_f~rlh..:1.f~1 ~c;hd/ic:::f/inriav/m~inlnrlov 1.0 Points 1.0 Points 1.0 Points 1.0 Points·1u1L"11Lu·1~ Question 12 of 21 my1v1oau1es: r-1NLou,:i--1~-.::,L: vnune Assessment A firm expects sales of R1 000 000, beginning inventory of R400 000 and ending inventory of R500 1.0 Points 000. Purchases are expected to amount to 35% of sales. Operating expenses is expected to amount to R600 000. The EBIT is closest to ... • A. R150 000. • B. R250 000. • )( C. R350 000. • D. R450 000. Question 13 of 21 A current ratio of 4,5:1 may indicate the firm has too much ... • A. cash. • B. inventory. • C. accounts receivable. • ~ D. All of the above. Question 14 of 21 With which type of funds would an organisation typically finance temporary current assets? • A. Long-term debt • B. Equity • C. Preference shares • ~ D. Short-term debt Part 4 of 5 - Section 3 Question 15 of 21 1.0 Points 1.0 Points 5.0 Points Hackleys Ltd. sold 10 000 units for the current financial year. Total fixed costs for the year amounted 1.0 Points to R2 000 000. The selling price per unit is R2 000, whereas the variable cost per unit is R500. Calculate the marginal income for the year. • A. R10 000 000·1U/[I/LU·1c1 • -~ • B. R12 000 000 C. R15 000 000 D. R17 000 000 Question 16 of 21 my1v1oau1es: r-11•uou,F1c1-;::,L: unune Assessmem Which one of the following costs are not an example of a variable cost? • A. Packaging materials • ~ 8. Rent-expense • C. Shipping costs • D. Raw materials Question 17 of 21 A company has fixed operating costs of R60 000, the selling price per unit is R13 and its variable cost per units is R9. Calculate the company's breakeven point. • ~ A. 15 000 units • B. 24 000 units • C. 29 000 units • D. 39 500 units Question 18 of 21 1.0 Points 1.0 Points All Brown Limited sold 10 000 units with a total fixed costs of R2 000 000 for the year. Their product 1.0 Points is sold at R2 000 per unit and the variable costs amounts to R500 per unit. Calculate the company's breakeven point in units. • A. 1 000 • ~ B.1 333 • C. 2 000 • D. 2 500 Question 19 9f 21 If a company expects to sell 400 000 units of canned meat in a year. What will the company's margin of safety ratio be if the company's breakeven volume is 285 000 units? httnc::·//m\/mnrl11loc:: 11nic::~ ~,.. 7~/nnr-t~l/c:::itt:l./l='lr\J?A0~-1 Q __C:::?/tnnJ/,..c:;,::;,~Qht:;A.-rlLlrl7-d7fa._h?fr_f~rfh.df~1 ~c;.h..1./ic::f/inrli:w/m~inlnrl!OY 1.0 Points·1u1L·11Lu·1~ my1v1oou1es: r-11\ILOU,j--1~-;:,L: unune Assessmem • ~ A.29% • B. 40% • C. 71% • D. 140% Part 5 of 5 - Section 4 Question 20 of 21 Use the following information for BMC Limited in order to answer the question: s receivable The gross profit margin for BMC Limited is closest to ... • A. 20% • ~ B.50% • C. 100% • D. 200% Question 21 of 21 Use the following information for BMC Limited in order to answer the question: httnc,-//m\/mnrh oloc, 1onic:ca "" 7ca/nnrlcal/c:ito/J:"ll\l?Anq_1 Q_~?/tnnJ/,.<;AAQh<;A..rlL1r17-<17fo_h?f,._forlhLl.fo1 q<;h,1/jc,f/inrlov/mcainlnrlov 2.0 Points 1.0 Points 1.0 Pointsmyiv1oau1es: r-11\ILOU,Fll:H:,L: un11ne Assessmem ccounts receivable The current ratio for BMC Limited is closest to ... • A. 1.2 • B.1.8 • X C. 2.0 • D. 2.4 • Gateway • Mobile View • The Sakai Project • University of South Africa • Powered by Sakai • Copyright 2003-2018 The Sakai Foundation. All rights reserved. Portions of Sakai are copyrighted by other parties as described in the Acknowledgments screen. httnc:·//m\/mnrl11lo.c:: 1inic::::1 :::ri,.. 7:::1/nnrt:::ril/c:::itc./l="ff\l?RfY:L1 Q_~?/tnnl/r•t:;AAQht:;R..rtdrl7_Lt7fc...h?f,.._f:::rirlhLlf:::ri1 ~l:;hL1/ic:::f/inrla.v/m:::riinlnrlov 71'·1utLI/LU·1::, 1. myModules I ; myAdmin i (...........•......................1 FIN2603-19-S2 / Online Assessment COnline Assessment Online Assessment my1v1oau1es: r-11\1.:::ou.,--1::,--,.:::: un11ne Assessmem 2 Assignment_2_2019 RETURN TO ASSESSMENT LIST Part 1 of 6 - Confidentiality agreement Question 1 of 26 0.0 Points 0.0 Points I )(Rika Hirselman with student number )(62256122 declare that this my own, true and honest work. I completed this assignment on my own and I did not receive assistance from any other student or individual. Part 2 of 6 - Section 1: Chapter 5 This section will test your knowledge on Time Value of Money. Question 2 of 26 9.0 Points William, the export manager of an international company, wishes to replace a machine five years 1.0 Points from now with a new machine that will cost R1 000 000 in five years' time. If equal end-of-year deposits are made into an account paying an interest of 9% per annum, calculate the size of each deposit. • A. R 23 535.24 • B. R 89 382.38 • C. R 123 546.23 • ~ D. R 167 092.45 Question 3 of 26 If Brett invests R5 000 at the beginning of each year at an interest rate of 8% over a ten-year period, 1.0 Points the future value of the investment would be ... · • A. R58 687.43 • B. R60 000.00 • ~ C. R78 227.44 httn<::·//m\lmnri, ,10 ., 1 inic:<> "" 7 ,,/nnrbl/<::ito/l=lf\l?Rff<-1 Q_C:::?/tnnl/,-<;RRQh<;A..rlLlri7..Ll.7fa_h?f,-_forihLlfo 1 ':l<;hLl/ic:f/inriov/m<>inlnriov 1 /C·1u1[11Lu·1::1 my1v1oau1es: r-1NLOU,j-·1::1-;:,L: unnne Assessmem • D. R81 000.00 Question 4 of 26 If Joel invests R50 000 in an unit trust offering a rate of return of 17% per annum, calculate how long it will take for the investment to reach R200 000. • ~ A. 8.80 years • B. 10.80 years • C. 11.40 years • D. 13.50 years Question 5 of 26 Calculate the present value (PV) of R100 000 received 9 years from today at an interest rate of 12%. • A. R27 895 • ~ B. R36 061 • C. R37 980 • 0. R43 998 Question 6 of 26 1.0 Points 1.0 Points If R50 000 was invested in a fund offering a rate of 15% per year, approximately how many years 1.0 Points will it take for the investment to reach R100 000? • A. 4 years • ~ B. 5 years • C. 7 years • O. 13 years Question 7 of 26 How much should Alfred invest today at 9% interest per annum, compounded quarterly, to be able 1.0 Points to buy a house worth R2 500 000 six years from today? • )( A. R 672 971.33 • B. R1 115 564.17 ?I<·1utLI/LU"l::I • C R1 465 616 71 • D. R1954322.19 Question 8 of 26 myMoouies: r-11'\ILou.:i--1:::,-;:,L: unnne Assessmem What is the present value of an annuity that pays R12 500 in five equal annual payments assuming 1.0 Points a discount rate of 7%? • A. R 8 912.33 • ~ B. R51 252.47 • C. R52 606.24 • D. R72 329.67 Question 9 of 26 If you were to borrow R200 000 over three years at an annual interest rate of 8%, what would the 1.0 Points repayment on the principle amount of the loan be in year 2? • A. R 66 535.24 • B. R 71 858.06 • C. R 77 606.70 • )( D. R112 153.85 Question 10 of 26 What is the present value of an annuity that pays R25 000 in seven equal annual payments assuming a discount rate of 13%? • A. R 80 626.52 • B. R 94 385.61 • ~ C. R 110 565.26 • D. R 124 938.75 Part 3 of 6 - Section 2: Chapter 6 This section will-test your knowledge on Capital budgeting. Question 11 of 26 httn<::·//rn\/rnnrl11lc<:: , ,ni<::::a ::or 7::,/nnrt::al/<::itc/l=lf\l?R()':\..1 Q..C::?/tnnlfr<;RRQh<;R..rlLl.rl7...ll7fo..h?fr..f::arlhLlf::a1 ':\<;h;l/j<::f/inrlcv/rn::ainlnrlcv 1.0 Points 4.0 Points ':\/(·1U/L'I/LU·1::, myiv1oau1es: r-1NLOU.:Fll:f-;:.L: unnne Assessmem The present value of the cash flows of an investment is expected to total R250 000. The profitability 1.0 Points index is calculated at 1.40. Calculate the initial investment. • A. R127 562.43 • B. R148 571.43 • C. R162 857.14 • .; D. R178 571.43 Question 12 of 26 Renmax Ltd has made an initial investment of R1000 000 in a new project. The firm's cost of capital 1.0 Points is 13%. The investment is expected to generate the following cash inflows over the next five years: Year 1: R 50 000 Year 2: R 60 000 Year 3: R 70 000 Year 4: R400 000 Year 5: R500 000 The profitability index (Pl) is ... therefore, the investment should ... • A. 0.66; be undertaken. • .; B. 0.66; not be undertaken. • C. 1.52; be undertaken. • D. 1.52; not be undertaken. Question 13 of 26 The financial manager is evaluating a proposal for a new project with the following cash flows: r The payback period is ... • A. one year. • B. two years. • C. between one and two years. • .; D. between two and three years. Question 14 of 26 httm,·//m\/mnrl11I<><:: 1ini<::<> "'" 7,:,/nnrt,:,l/cil<>iJ:ll\l?f;()':\_1 Q_~?/tnnl/,-<;f;f;Qh<;R..r1Llrl7..Ll7fa_h?f,-_farlhLlfa1 ':\<;hLl/icf/inrl<>v/m,:,inlnrl<>v 1.0 Points 1.0 Points LIi<·1u1L11Lu·1~ my1v1oou1es: r-tl'IILOu.:v1~-;::,L: unnne Assessmem Bigbuy Ltd has made an initial investment of R500 000 on a new project. The firm's cost of capital is 8%. The investment is expected to generate the following cash inflows: Year 1: R100 000 Year 2: R120 000 Year 3: R 80 000 Year 4: R140 000 Year 5: R 30 000 The profitability index (Pl) is...thus the investment should ... • A. 0.7646; be undertaken. • ~ B. 0.7646; not be undertaken. • C. 1.3079; be undertaken. • D. 1.3079; not be undertaken. Part 4 of 6 - Section 3: Chapter 7 This section will test your knowledge on Financing. Question 15 of 26 Customer care Limited has determined its optimal capital structure, which comprises the following: s The weighted average cost of capital is ... • A. 5.3°/o. • B. 6.2°/o. • ~ C. 8.0%. • D.9.1°/o. Question 16 of 26 4.0 Points 1.0 Points ' The after-tax cost of debt for a firm, which has a marginal tax rate of 35%, is correctly calculated at 1.0 Points 6%. Calculate the before-tax cost of debt. • A.. 6.0°/o • B.8.1% • ~ C. 9.2% • D.17.1% httnc::·//m\/mnrli aloe:: 11nic::~ ~,... 7 ~/nnrt~l/c::ito/~IJ\l?Af1~-1 Q_~?/tnnl/rl,AAQhl,A..riLlrl7_A7fo_h?f,.._f!;llrlhLl.f~1 ~1,hLl./ic::f/inrlov/m~inlnrlov·1utL.I/LUHJ myiv1oau1es: r-11\ILOU.j-·1::1-.:,L: unune Assessment Question 17 of 26 A company has financed 45% of its assets through a 11 % after-tax cost of debt loan. The remainder 1.0 Points of its assets are financed through equity. The firm's required return on equity is 16%. What is the company's weighted average cost of capital (WACC)? • A. 11.25% • ~ B.13.75% • C. 28.50o/o • D. 43.56% Question 18 of 26 A firm has a loan with an interest rate of 15%. The firm is subject to a tax rate of 30%. What is the 1.0 Points firm's after-tax cost of debt? • A. 4.5% • B. 10.5% • C. 15.0% • X D. 22.5% Part 5 of 6 - Section 4: Chapter 8 This section will test your knowledge on the Management of Working Capital. Question 19 of 26 A company increasing its credit terms for customers from 2/15 net 60 to 2/20 net 90 will likely experience ... • A. higher net income. • B. an increase of cash in hand. • ~ C. an increase in the average collection period. • D. a decrease in the average collection period. Question 20 of 26 5.0 Points 1.0 Points During the past year a firm received cash from clients amounting to R11 000. The firm paid creditors 1.0 Points and employees an amount of R3 900. Interest paid amounted to R1 200. No dividends were paid out. The firm paid normal tax amounting to R500. The cash flow from operations amounts to ... • A. R? 100. P,/(·1u/[I/LUH:I • B. R4 500. • C. R4 600. D. R5 400. Question 21 of 26 my1V1oau1es: r-1NLou.:v1::H:>L: unnne Assessmem The cost of a giving-up-cash discount under the terms of sale 4/10 net 35 is ... (Assume a 360-day 1.0 Points year.) • )C A. 40.11 % • B. 60.00% • D. 99.34°/o Question 22 of 26 Calculate the EOQ based on the following information: 21 000 units used annually, purchased at R65 per unit. Order cost is R340 per order. Carrying cost is 9% of inventory value. • ~ A. 1 562 units • B. 1 599 units • C. 1 614 units • D. 1 633 units Question 23 of 26 1.0 Points A company has a cash conversion cycle of 50 days. Annual outlays are R1Omillion and the cost of 1.0 Points negotiated financing is 9%. Calculate its annual savings if the company reduces its average age of inventory by 15 days. Assume 360 days per year. • A. R15 679 • )C B. R17 778 • C. R37 500 • D. R52 500 Part 6 of 6 - Section 5: Cash budget 3.0 Points This section will test your knowledge on Constructing a Cash Budget. httnc::·//m\/mnrl11lcu;: 1inic::::::1 ~r 7~/nnrt!:11/c::ifA/l=lt\.l?R()~-1 Q_~?/tnnl/rt:::;RRQht:;R-f"'IL1.rl7..Ll7fo._h?fr_f~rlhL1.f~1 ~t:;h.d/ic::f/inrla.v/m~inlnrl.::i.v 7/<·1utLHLU.l::J my1V1oau1es: r-11\JLOu.:i--1::i-;:,L: unnne Assessmem Question 24 of 26 The actual sales for Premium Services for February and March, together with its forecast sales for 1.0 Points the period April to July, are supplied in the following table: MONTH SALES (R) February 206 600 March 188 220 April 154 400 May 128 200 June 146 480 July 130 200 Of the sales of the organisation, 80% is sold for cash and the balance is collected the following month. The organisation purchases its stock one month in advance of expected sales dates at 50% of the projected sales value and pays cash for such purchases. The firm owns the building in which it operates and space not utilised by the firm provides rental income from other small businesses worth R40 000 per month. The business anticipates increasing the current rental fees charged by 10% as from 1 June. The business currently employs a manager, 4 sales people, a cashier, a driver and 5 technicians. Salaries (cost to company, excluding sales commission) will amount to R90 448 in April, R91 200 in May and R93 600 in June. Sales commission normally amounts to 4% of the sales. The following expenses are also payable in cash and need to be budgeted for on a monthly basis as follows: •VAT estimated at 14%, based the purchases paid for each month. •water and electricity amounting to R5 500 for April, R5 800 for May and R5 200 for June. •telephone costs (including Internet) amounting to R4 755 for April, R4 266 for May and R3 800 for June. A sponsorship to a school amounting to R12 000 is payable in May. Assuming a beginning cash balance of R63 000 on 1 April, determine the cash receipts, disbursements and balances for the months of April, May, and June by means of a cash budget. The total cash inflow for June is expected to be closest to ... • A. R 179 800 • )C B. R 184 300 • C. R 188 100 • D.R190480 Question 25 of 26 ... The actual sales for Premium Services for February and March, together with its forecast sales for 1.0 Points the period April to July, are supplied in the following table: MONTH SALES (R) February 206 600 March 188 220 April 154 400 May 128 200 June 146 480 July 130 200 Of the sales of the organisation, 80% is sold for cash and the balance is collected the following month. The organisation purchases its stock one month in advance of expected sales dates at 50% of the projected sales value and pays cash for such purchases. The firm owns the building in which it operates and space not utilised by the firm provides rental income from other small businesses worth R40 000 per month. The business anticipates increasing the current rental fees charged by 10% as from 1 June. The business currently employs a manager, 4 sales people, a cashier, a driver and 5 technicians. Salaries (cost to company, excluding sales commission) will amount to R90 448 in April, R91 200 in May and R93 600 in June. Sales commission normally amounts to 4% of the sales. The following expenses are also payable in cash and need to be budgeted for on a monthly basis as follows: •VAT estimated at 14%, based the purchases paid for each month. •water and electricity amounting to R5 500 for April, R5 800 for May and R5 200 for June. •telephone costs (including Internet) amounting to R4 755 for April, R4 266 for May and R3 800 for June. A sponsorship to a school amounting to R12 000 is payable in May. Assuming a beginning cash balance of R63 000 on 1 April, determine the cash receipts, disbursements and balances for the months of April, May, and June by means of a cash budget. The net cash flow for April is expected to be closest to ... • A. R 21 211 • B. R 31 234 • )C C. R 34 678 • D. R 54 980 httno:·//m\/mnrio olo<: 11ni<:<=1 "" 7<=1/nnrfal/o:ito/j::ll\l?Rn<L1 Q_C:::?/tnnl/,..<;RRQh<;A...,i,1,i7_,17fo_h?f,.._fo,ih,ifo1 ?.<;h,1/jd/inriov/m<=1inlnriov A/C·1u1L11Lu·1::i Question 26 of 26 my1v1oau1es: r-1NLOU,j-·1::i-;:,L: unune Assessmem The actual sales for Premium Services for February and March, together with its forecast sales for 1.0 Points the period April to July, are supplied in the following table: MONTH SALES (R) February 206 600 March 188 220 April 154 400 May 128 200 June 146 480 July 130 200 Of the sales of the organisation, 80% is sold for cash and the balance is collected the following month. The organisation purchases its stock one month in advance of expected sales dates at 50% of the projected sales value and pays cash for such purchases. The firm owns the building in which it operates and space not utilised by the firm provides rental income from other small businesses worth R40 000 per month. The business anticipates increasing the current rental fees charged by 10% as from 1 June. The business currently employs a manager, 4 sales people, a cashier, a driver and 5 technicians. Salaries (cost to company, excluding sales commission) will amount to R90 448 in April, R91 200 in May and R93 600 in June. Sales commission normally amounts to 4% of the sales. The following expenses are also payable in cash and need to be budgeted for on a monthly basis as follows: •VAT estimated at 14%, based the purchases paid for each month. •water and electricity amounting to RS 500 for April, R5 800 for May and RS 200 for June. •telephone costs (including Internet) amounting to R4 755 for April, R4 266 for May and R3 800 for June. A sponsorship to a school amounting to R12 000 is payable in May. Assuming a beginning cash balance of R63 000 on 1 April, determine the cash receipts, disbursements and balances for the months of April, May, and June by means of a cash budget. The closing balance for April is expected to be closest to ... • • A. R 84 211 • B.R94211 • C. R 100 234 • )( D. R 201 234 • Gateway • Mobile View • The Sakai Project • University of South Africa • Powered by Sakai • Copyright 2003-2018 The Sakai Foundation. All rights reserved. Portions of Sakai are copyrighted by other parties as described in the Acknowledgments screen. hllnc·//m\/mnrh ii<><: 11 ni<::<> "'" 7<1/nnrl<1l/<::it,:,/J:lf\l?Rn".:\_1 Q_~?/lnnl/r-<;RRQh<;A..riil.rl7..Ll7f,:,_h?f,-_farlhil.fa 1 ".:\<;hil./i<::f/inrl,:,v/m<>inlnrl,:,v Q/(ImyModules I ImyAdmin ! FIN2603~19-S2 / Online Assessment COnline Assessment Online Assessment my1v1oau1es : t-ll\1Lou.:i-H1-;:,L : un11ne Assessmem 2 Assignment_2_2019 RETURN TO ASSESSMENT LIST Part 1 of 6 - Confidentiality agreement Question 1 of 26 0.0 Points 0.0 Points I )(Rika Hirselman with student number )(62256122 declare that this my own, true and honest work. I completed this assignment on my own and I did not receive assistance from any other student or individual. Part 2 of 6 - Section 1: Chapter 5 This section will test your knowledge on Time Value of Money. Question 2 of 26 Calculate the future value (FV) of R15 000 invested for six years at an interest rate of 8%, compounded semi-annually. • A. R14 026 • B. R14 106 • C. R24 015 • )( D. R26 734 Question 3 of 26 9.0 Points 1.0 Points How much should Alfred invest today at 9% interest per annum, compounded quarterly, to be able 1.0 Points to buy a house worth R2 500 000 six years from today? • )( A. R 672 971.33 • B. R1115 564.17 • C. R1 465 616.71 • D. R1 954 322.19 httnc::·//m\/rnnrl11 Joc:: 11nic::~ ~r 7~/nr.rt::al/c::ito/l=lf\l?Rn-:t_1Q_~?/tnnl/rt:;.R~Qht:;A..riL1.rl7-L17fo._h?fr_f~tihL1.f~ 1 ":tr:;.hLl/ic::f/c::olo.f'tlc::c.lo.rtlnrlo.v 1 /1 (·1u1L'11Lu·1~ Question 4 of 26 my1v1oau1es: t-lNLOU,Fl~-;::,L: unune Assessmem Calculate the future value (FV) of R15 000 invested for six years at an interest rate of 8%, compounded monthly. • A. R14 026 • B. R23 803 • C. R24 260 • X D. R26 734 Question 5 of 26 Calculate the growth rate of the following stream of cash flows: • A. 23% • B. 26% • X C.43% • D. 53% Question 6 of 26 What is the growth rate of the following stream of cash flows? w 1.0 Points 1.0 Points 1.0 Points ?/1/•X • • A. 5.81% B. 9.50% C.12.87% D.14.59% Question 7 of 26 my1v1oau1es: J-JJ'\JLlJU,Fl~-.:,L: unnne Assessmem Calculate the present value of the following stream of cash flows: Cash flow 1 R18 000 Cash flow 2 R21 000 Cash flow 3 R20 000 Cash flow 4 R16 000 Assume a discount rate of 6% and work to the nearest Rand. • A. R59 407 • B. R65 137 • C. R69 045 • )( D. R72 319 Question 8 of 26 Calculate the future value (FV) of R35 000 invested for six years at an interest rate of 8%, compounded semi-annually. • A. R14 026 • B. R44 106 • ~ C. R56 036 • D. R76 734 Question 9 of 26 R2 000 is invested at 7% for the first year, 8% for the second year and 9% for the third year, compounded annually. The future value at the end of the third year is closest to ... • ~ A. R2 519 • B. R2 690 • C. R2 794 1.0 Points 1.0 Points 1.0 Points '</11""- ·1u1L°11Lu·1::1 myiv1oou1es: rlNLou,,--1::1-;:,L: un11ne Assessmem o D. R2 849 Question 1Oof 26 Calculate the future value (FV) of R10 000 invested for 5 years at an interest rate of 7%, interest compounded semi-annually. . )( A. R14 026 • B. R14 106 • C. R14 900 • D. R16 234 Part 3 of 6 - Section 2: Chapter 6 This section will test your knowledge on Capital budgeting. Question 11 of 26 1.0 Points 4.0 Points Bigbuy Ltd has made an initial investment of R500 000 on a new project. The firm's cost of capital is 1.0 Points 8%. The investment is expected to generate the following cash inflows: Year 1: R100 000 Year 2: R120 000 Year 3: R 80 000 Year 4: R140 000 Year 5: R 30 000 The profitability index (Pl) is...thus the investment should • A. 0.7646; be undertaken. • .,,, B. 0.7646; not be undertaken. • C. 1.3079; be undertaken. • D. 1.3079; not be undertaken. Question 12 of 26 The financial manager is evaluating a proposal for a new project with the following cash flows: Year 0 2 3 The payback period is ... • A. two years. 1.0 Points Ll/11• B. between one and two years. • C. three years. D. more than three years. Question 13 of 26 my1v1oau1es: rlNLOU,j--1~-;:,L: un11ne Assessmem The present value of the cash flows of an investment is expected to total R250 000. The profitability 1.0 Points index is calculated at 1.40. Calculate the initial investment. • A. R127 562.43 • B. R148 571.43 • C.R162857.14 • ~ D. R178 571.43 Question 14 of 26 Renmax Ltd has made an initial investment of R1000 000 in a new project. The firm's cost of capital 1.0 Points is 13%. The investment is expected to generate the following cash inflows over the next five years: Year 1: R 50 000 Year 2: R 60 000 Year 3: R 70 000 Year 4: R400 000 Year 5: R500 000 The profitability index (Pl) is ... therefore, the investment should ... • A. 0.66; be undertaken. • ~ B. 0.66; not be undertaken. • C. 1.52; be undertaken. • D. 1.52; not be undertaken. Part 4 of 6 - Section 3: Chapter 7 This section will test your knowledge on Financing. Question 15 of 26 The after-tax cost of debt for a firm which has a marginal tax rate of 40%, is 6%. Calculate the before-tax cost of debt. • A. 6.0% • B.8.1% • C. 9.2% • ~ D.10.0% httnc::·//m\/mnrh 1loc 11nic::::t ::tr 7::t/nnrt:::al/c:ifa./1=11\l?Rn~-1 Q_~?/tnnl/r•c:::;j::~J~Qht:;A..rL1rl7-d7fc....h?fr..f!:=!rlh.1.f::t1 ~,:::;hL1/ic::f/c:alo.rt/c:olc.rtlnrlov 4.0 Points 1.0 Points c;11, Question 16 of 26 myiv1oau1es: r-1NLOU,j-·1~-;:,L: un11ne Assessmem PPT Ltd. has determined its optimal capital structure, which comprises the following: The weighted average cost of capital is ... • A. 5.3% • ffi/ B. 7.7% • C. 8.4% • D. 9.1% Question 17 of 26 Customer care Limited has determined its optimal capital structure, which comprises the following: The weighted average cost of capital is ... • A. 5.3o/o. • B. 6.2%. • ffi/ C. 8.0%. • D. 9.1 o/o. Question 18 of 26 ost 1.0 Points 1.0 Points A firm has a loan with an interest rate of 12%. The firm is subject to a tax rate of 28%. What is the 1.0 Points firm's after tax cost of debt? • A. 3.36o/o l'\/1'• • B. 8.64% C. 11.28% D.12.72% Part 5 of 6 - Section 4: Chapter 8 mytv1oawes : i-1NLou.,-n,-;:,L : unnne Assessmem This section will test your knowledge on the Management of Working Capital. Question 19 of 26 5.0 Points A company has a cash conversion cycle of 50 days. Annual outlays are R1Omillion and the cost of 1.0 Points negotiated financing is 9%. Calculate its annual savings if the company reduces its average age of inventory by 15 days. Assume 360 days per year. • A. R 15 679 • B. R 37 500 • )( C. R 87 500 • D. R125 000 Question 20 of 26 C and J Limited extend credit terms of 36 days to its customers. Its credit collection would likely be 1.0 Points considered poor if its average collection period was ... • A. 35 days. • B. 36 days. • ~ C. 39 days. • D. 0 days. Question 21 of 26 A firm with a cash conversion cycle of 40 days can stretch its average payment period from 15 days 1.0 Points to 20 days. This will result in a/an ... • A. decrease of 5 days in the cash conversion cycle. • )( B. increase of 5 days in the cash conversion cycle. • C. decrease of 20 days in the cash conversion cycle. • D. increase of 20 days in the cash conversion cycle. httnc:::·//m\/mnrli iloc:: 11nic:::~ ~r 7 ~/nnrf~l/c::.ito/J:'lf\1?1=;;()~-1 Q_~?/tnnl/rl,,~~Qht:;;~JiLlrl7-Li7fc._h?fr-f:uih..1.f!;l 1 ~t:;hL1/ic:::f/c:::eilort/c::olortlnri.:::iiv 7111·1U/L"I/LU·1:;, Question 22 of 26 myiv1oau1es: r-JNLIJU.:>-·1::1-;:,L: unnne Assessmem A firm with a cash conversion cycle of 50 days can stretch its average payment period from 15 days 1.0 Points to 30 days. This will result in a/an ... • A. decrease of 15 days in the cash conversion cycle. • B. increase of 10 days in the cash conversion cycle. • C. decrease of 30 days in the cash conversion cycle. • )( D. increase of 15 days in the cash conversion cycle. Question 23 of 26 A company increasing its credit terms for customers from 2/15 net 60 to 2/20 net 90 will likely experience ... • A. higher net income. • B. an increase of cash in hand. • ~ C. an increase in the average collection period. • D. a decrease in the average collection period. Part 6 of 6 - Section 5: Cash budget This section will test your knowledge on Constructing a Cash Budget. Question 24 of 26 1.0 Points 3.0 Points The actual sales for Premium Services for February and March, together with its forecast sales for 1.0 Points the period April to July, are supplied in the following table: MONTH SALES (R) February 206 600 March 188 220 April 154 400 May 128 200 June 146 480 July 130 200 Of the sales of the organisation, 80% is sold for cash and the balance is collected the following month. The organisation purchases its stock one month in advance of expected sales dates at 50% of the projected sales value and pays cash for such purchases. The firm owns the building in which it operates and space not utilised by the firm provides rental income from other small businesses worth R40 000 per month. The business anticipates increasing the current rental fees charged by 10% as from 1 June. The business currently employs a manager, 4 sales people, a cashier, a driver and 5 technicians. Salaries (cost to company, excluding sales commission) will amount to R90 448 in April, R91 200 in May and R93 600 in June. Sales commission normally amounts to 4% of the sales. The following expenses are also payable in cash and need to be budgeted for on a monthly basis as follows: •VAT estimated at 14%, based the purchases paid for each month. •water and electricity amounting to R5 500 for April, R5 800 for May and R5 200 for June. •telephone costs (including Internet} amounting to R4 755 for April, R4 266 for May and R3 800 for June. A sponsorship to a school amounting to R12 000 is payable in May. Assuming a beginning cash balance of R63 000 on 1 April, determine the cash receipts, disbursements and · balances for the months of April, May, and June by means of a cash budget. The total cash disbursement for May is expected to be closest to ... • )( A. R 179 953 • B.R 191 088 A/1/• C. R 201 888 • D. R 220 456 Question 25 of 26 my1v1oau1es: t-11\ILOU,Flt:H:>L: unune Assessmem The actual sales for Premium Services for February and March, together with its forecast sales for 1.0 Points the period April to July, are supplied in the following table: MONTH SALES (R) February 206 600 March 188 220 April 154 400 May 128 200 June 146 480 July 130 200 Of the sales of the organisation, 80% is sold for cash and the balance is collected the following month. The organisation purchases its stock one month in advance of expected sales dates at 50% of the projected sales value and pays cash for such purchases. The firm owns the building in which it operates and space not utilised by the firm provides rental income from other small businesses worth R40 000 per month. The business anticipates increasing the current rental fees charged by 10% as from 1 June. The business currently employs a manager, 4 sales people, a cashier, a driver and 5 technicians. Salaries (cost to company, excluding sales commission) will amount to R9o" 448 in April, R91 200 in May and R93 600 in June. Sales commission normally amounts to 4% of the sales. The following expenses are also payable in cash and need to be budgeted for on a monthly basis as follows: •VAT estimated at 14%, based the purchases paid for each month. •water and electricity amounting to R5 500 for April, R5 800 for May and R5 200 for June. •telephone costs (including Internet) amounting to R4 755 for April, R4 266 for May and R3 800 for June. A sponsorship to a school amounting to R12 000 is payable in May. Assuming a beginning cash balance of R63 000 on 1 April, determine the cash receipts, disbursements and balances for the months of April, May, and June by means of a cash budget. The net cash flow for April is expected to be closest to ... • A.R21211 • B. R 31 234 • C. R 34 678 • )( D. R 54 980 Question 26 of 26 The actual sales for Premium Services for February and March, together with its forecast sales for 1.0 Points the period April to July, are supplied in the following table: MONTH SALES (R) February 206 600 March 188 220 April 154 400 May 128 200 June 146 480 July 130 200 Of the sales of the organisation, 80% is sold for cash and the balance is collected the following month. The organisation purchases its stock one month in advance of expected sales dates at 50% of the projected sales value and pays cash for such purchases. The firm owns the building in which it operates and space not utilised by the firm provides rental income from other small businesses worth R40 000 per month. The business anticipates increasing the current rental fees charged by 10% as from 1 June. The business currently employs a manager, 4 sales people, a cashier, a driver and 5 technicians. Salaries (cost to company, excluding sales commission) will amount to R90 448 in April, R91 200 in May and R93 600 in June. Sales commission normally amounts to 4% of the sales. The following expenses are also payable in cash and need to be budgeted for on a monthly basis as follows: •VAT estimated at 14%, based the purchases paid for each month. •water and electricity amounting to R5 500 for April, R5 800 for May and R5 200 for June. •telephone costs (including Internet) amounting to R4 755 for April, R4 266 for May and R3 800 for June. A sponsorship to a school amounting to R12 000 is payable in May. Assuming a beginning cash balance of R63 000 on 1 April, determine the cash receipts, disbursements and balances for the months of April, May, and June by means of a cash budget. The closing balance for June is expected to be closest to ... • ~ A·. R 42 716 httnc·//m\/mnrl,,lcc , ,nic,:, ,:,r 7"/nnrt,:,l/c:itc/l=ll\l?An"l_1Q__C:::?/tnnl/r<;AAQh<;R..rl4rl7..47fo_h?fr_farlh4fa 1"l<;h4/id/cclcrt/cclcrtlnrl<>v Q/1(·1 u,L'II .:::u 1~ myiv1oau1es : i-- 11'\ILOU,FI ~-;:,.::: : unnne Assessmem • B. R 50 523 • C. R 63 000 • D.R84211 • Gateway_ • Mobile View • The Sakai Project • University of South Africa • Powered by Sakai • Copyright 2003-2018 The Sakai Foundation. All rights reserved. Portions of Sakai are copyrighted by other parties as described in the Acknowledgments screen. httnc·//m\/mnrl,,loc 11nic<> "" 7,:,/nn.-t,:,l/cilo/l=IJ\l?Rnq_1 Q_~?/lnnl/r<;RRQh<;R..rl'1rl7..L!.7fo_h?fr_forlh'1fo1 q<;h,1/id/colort/colortlnrlov 1n11,FIN 2603-A2 Set 1 2=CH5 Find Fv Fv-pv= B Mr. P has arranged for a 60 day loan at the annual interest rate of 9.5%. If the loan amount is R1 000 000, how much interest will P pay in rands ( 360=year day) Find FV a) PV=100 000 b) FV-PV A. 15 833 i= 9.5 (ANN) n= 1(bi-monthly) compounding bi monthly TIME VLAUE OF MONEY 3 Calc the FV of R15 000 invested for 6yrs at the IR of 8% compounded semiannually PV=15 000 i-8% (ann) A. R24 015 n=6 (ANN) 4 How much should be invested today at 8% interest pa. compounded quarterly to be able to buy a house worth R 1000 000, 5 yrs. From today A. R672 971.33 FV= 1000 00 i=8% ann n=5 ann 5 use NPV calcleave year 0 blank Find the present value of the ffg stream of cash flows by assuming that the org. has an opportunity cost of 11%. Years 1-2 R 20000 years 3-8 R30000. C. R137 258.45 IRR/NPV calculator 6 What would R12 500 invested today a 8% compound interest pa. be worth in the 6 yrs. i=8% A. R19 836 n= 6 (ANN) 7 Calc the FV of R35 000 invested for 6 years at an interest of 8% compounded semi-annually A. 14 026 PV=35 000 B. R44 106 i= 8% C. R56 036 n= 6 D. R76 734 compounding semi-ann 8 Find the PV of the ffg stream of cash flows by assuming that the org has an opp. cost of 12%: YRS. 1-3 R23 000 & YRS. 4-7 R38 000 A. R71 203.41 B. R100 268.41 C. R122 268.41 D. R137 395.28 9 … is the interest earned on a given deposit that has become part of the sum at the end of specific period. A. COMPOUND INTEREST=pg85 B. SIMPLE INTEREST C. THE INTEREST RATE D. THE INTERNAL RATE OF RETURN 10 If you were to borrow R200 000 over 3 years at an annual interest rate of 8%, what would the repayment on the principle amount of the loan be in year 2 A R 66 535.24 PV=2000 000 i=8% n= 3 annB R 71 858.06 PMT = C C R 77 606. 70 D R 112 153.85 11-CH 6 BB Ltd has made an initial investment of R500 000 on a new project. The firm’s cost of capital is 8%. The investment is expected to generate the ffg. Cash inflows: Y1(100 000) Y2(120 000) y3(80 000) Y4 (140 000) Y5(30 000). The PI is… thus the should be A. 0.7646: BE UNDERTAKEN B. 0.7646: NOT UNDETAKEN C. 1.3079: BE UNDERTAKEN D. 1.3079: NOT UNDERTAKEN Budgeting 12 GO Ltd has made an initial investment of R 500 000 in a new project. The firms cost of capital is 12%. The investment is expected to generate the ff. inflows over the next 5 yrs: Y1(50 000) Y2(60 000) Y3(150 000) Y4(140 000) Y5(300 000). The PI is…0.91. Therefore the investment should A. 0.92 BE UNDERTAKEN use IRR calc B. 0.92 NOT UNDETAKEN L1=-500 000 C. 1.09 BE UNDERTAKEN D. 1.09 NOT UNDETAKEN 13 Pg 112 The PI is also called the Benefit Cost Ratio A. TRUE B. FALSE 14 Pg 118 If IRR is smaller than the cost of capital (k) the project will not add value to the organisation. IRR > to CoCapital accept A. TRUE B. FLASE 15-CH 7 SG pg 43 Debt is generally the least expensive source of capital. This is due to….. A. Fixed interest payments B. Its position in the priority of claims on assets and earnings in the event of liquidation. C. the tax deductibility of interest payments. D. the secured nature of a debt obligation. Financing 16 Pg 121 The creditors of a company have voting rights with regards to the appointment of the BO Directors. A. TRUE B. FLASE 17 Pg 127 Characteristics of the industry include… A. COMPETITIVE FORCES B. SEASONAL VIRATIONS C. CYCLIC VARIATIONS D. ALL OF THE ABOVE 18 Pg. 124/5 Is the ability to adjust sources of funds upwards (Considerations in financing assets) FLEXIBILITY 19-CH8 Pg 135 ABC ltd purchased raw materials on account & paid them within 30 days (APP). The raw materials were used in the manufacturing of finished goods that were sold on account 100days (AAI) after the raw materials were purchased. The customer paid for the finished goods 60(ACP) days later. Calculate the cash conversion cycle. CCC = AAI + ACP - APP A. 10 DAYS 100+60-30 B. 70 DAYS = 160-30 C. 130 DAYS D. 190 DAYS20 PG 153 The cost of giving up cash discount under the terms of sale 4/10 net 35 is (360d/y) CD x 360 (1-CD) N A. 40.11% B. 60.00% C. 78.00% D. 99.34% Ch 8 21 Pg 138 Calc the EOQ: 18 506 units used annually, purchases at R55 pu. Order cost is R336 po. Carrying costs is 9% of inventory value EOQ= 2X(FxS) = CXP 0.09x 55 A. 1585 UNITS B. 1599 C. 1614 D. 1633 Ch 8 22 The cost of giving –up cash discount under the terms of sales 3/10 is…(360 d/y) A. 37.11% B. 55.6% C. 112.76% D. 118.68% 23 Pg 138 Calculate the EOQ: 1600units used annually. Ordering costs amount to R210 per order. Carrying cost R180pu per year. A. 4UNITS B. 43UNITS C. 52UNITS D. 61UNITS 24 Pg 153 The cost of a giving up a cash discount under the terms of sale 4/10 net 30 is .. assume 360d/y. ) CD x 360 (1-CD) N A. 37.11% B. 55.67% C. 75% D. 111.34% 25 A CO has a cash conversion cycle of 50days. Annual outlays are R8mil. And the cost of negotiated financing is 8%. Calc the annual savings, if the company reduces its average age of inventory by 10days. (360d/y) (8mil/360) X 10x0.08 A. R15 679.20 B. R17 777.78 C. R320 000.67 D. R640 000.67 SET 2 2 FV= - If John invests R20 000 in a unit at the rate of 16% pacalculate how long it will take for the invest to reach R100 000 A 10YRS PV= 20 000 B11YRS FV=-100000 14YRS R= 16% 15YRS 3 PV=- What is the growth rate of the ffg: year Cash flow A 23% PV=-4180 B 26% FV=60102013 3600/1700 2012 3000 2011 1900 2010 1000 C 43% N=3 (LEAVE OUT Y1) D 53% =19% if FV = R1700 4 5 6 What amount must be invested annually(beginning) for 5 successive years at 8% compounded p.a. to yield R500 000…finding PMT A.R 78 915.03 (PMT) FV= 500 000 B R82 047.05 I = 8% C R89 383.21 n= 5 D R92 000.44 Change clac to BEGINING 7 Cal the difference between the ffg: (a) R1 401.82 invested annually for 5 successive yrs at 9% pa. (b) R5 209.22 invested for a period of 5yrs @ 10% pa A R0 (a-b) (a) PMT = 1401.82 (b) PV= 5209.22 B R36.10 I = 9 I= 10 C R 80.25 N=5 N=5 D FV= 8389.49 FV= 8389.50 8 What is the growth rate of the ffg: year Cash flow 2018 6010 2017 5360 2016 4680 2015 4180 A 5.81 PV=-4180 B 9.50 FV=6010 C 12.87 N=3 (LEAVE OUT Y1) 14.59 9 Mr Parker arranged for a 60 day loan at an interest rate of 9.5% pa. If the loan amount is R1000 000, how much will he pay in rands A R12 500 use advance TVM calc: PV =1000 000 B R15 833 I = 9.5% PA C R23 556 N=1 –BI-MONTHY D R 45 000 FV= 1 015 240 (FV-PV=I in rands) 10 What would R15 000 invested today a 9% compound interest pa. be worth in the 7 yrs. A R8206 straight ffd FV calculation B R9450 C R27 421 D R320578 11-CH 6 Pg 113/6 If the PI is > 1, the project will not add value to the org. PI = total present values of the net cash flows initial investment (benefit-cost ratio) greater than or equal to one, accept otherwise reject the project: TRUE /FALSE 12 Repeat Q12 set 1 PI/CASH FLOW 13 SG pg 39 The payback period for Q12 should be A. Longer than the duration of the project B. As long as possible C.As short as possible D.As long as the duration of the project14 The PV of cash flows of an investment is expected to be R250 000. The PI is 1.40. Cal the initial investment PI = total present values of the net cash flows initial investment A R127 562.43 B R148 571.43 - INITIAL INVEST = total present values of the net CF C R162 857.14 PI D R178 571.43 15-CH 7 Liabilities = Total Assets + Owners Equity Owners' equity = total assets – liabilities TRUE /FALSE 16 Total assets= OE-L total assets= OE+L TRUE/FALSE 17 Pg 177 Short-term debt is scheduled to mature with a 2 yr period. TRUE/ FALSE Short-term debt: debt that is scheduled to mature within one year. 18 Before-tax cost of debt has a 20% Margin tax rate, is correctly calculated at 15%. Calculate the After tax cost of debt A 15% ATCoD= INTEREST(1-TAX RATE)= 15%(1-0.20) B13% C12% D11% 19. CH 8 Pg 153 The cost of a giving up a cash discount under the terms of sale 3/10 net 30 is ... assume 360d/y CD 360 = 0.03 360 (1-CD) X 20 (30-10) 1-0.03 X 20 A 37.11% B 55.67% C 112.76% D 118.68% 20 Pg 133/4 A firm has a cash conversion cycle of 60days (CCC), an average payment of 30 days (APP) & an average collection period of 60days(ACP). What is the age of inventory CCC = AAI + ACP – APP= 60= x+60-30 A-90day B 0DAYS C 30days D 150 days 21 Same as Q19 set 1 22 C&J Ltd extended credit terms of 36 days to its customers. Its credit collection would be poor if it average collection period was A 35 days B 36 days C 39 days D 0 days 23 A firm has a cash conversion cycle of 50days, annual layouts are R10mil and cost negotiated is 9%. Calc the annual savings if it reduces its AAI by 15 days. 360/1yr. (10mil/360) X 15x0.09 A R 15 679 B R17 778 C R37 500 D R52 500 24 A firm is offered payment terms of 1/10 net 30. Calculate the cost of a giving up a cash discount… assume 365d/y: CD 365 = 0.01 365 (1-CD) X 20 ( 1-0.01) X 20 A 12% B 12.30% C 18.43 D 36.87%25 Pg 138 Clac the EOQ : 21 000units used pa, purchased at R65 per unit. Order cost is R340 per order. Carrying cost is 9% of inventory value: EOQ= 2X(FxS) = 340x21000 CxP 0.09x65 sr A 1562 UITS B 1599 U C 1614 U D1633 U 26 Pg 155 During the past year a firm received cash client amounting to R11 000. The firm paid creditors & employees R3900. Interest pd was R1200. No dividends were paid out. Normal tax was R500. Cash flow from operations was…. A R7 100 B R4 500 C R4 600 D R5 400 SET 3 1 2 -CH 5 Pg 90 If Conrad invests R2000 at the beginning of each year(PMT) at an IR of 10% over 5 yrs, the FV will be A R6 105.10 PMT= -2000 B R6 715.61 I = 10% C R12 210.20 N = 5 D R13 431.22 3 W wishes to replace a machine 5yrs from now with a new machine that will cost R1000 000 in 5 yrs. If equal-end-of –year deposits are made into an account paying an Interest of 9% pa. Calculate the size of each deposit (PMT) A R23 535.24 FV=1000 000 B R 89 382.38 I = 9% C R 123 546.23 N= 5 D R 167 092.45 4*** If Joel invests R50 000 in unit trust at 17% pa. Calculate how long it will take the investment to reach R200 000 A 8.8 YRS PV= -50 000 B 10.8 FV= 200 000 C 11.4 I= 17% D 13.5 5 FM wishes to replace a machine 5yrs from now with a new machine that will cost R700 000 in 6 yrs. If equalend-of –year deposits are made into an account paying an Interest of 11% pa. Calculate the size of each deposit (PMT) A R23 535.24 FV= 700 000 B R49 382.38 I = 11% C R88 463.60 N= 6 (same as the FV) D R95 345.78 6 Calculate the PV of R250 000 received 5yrs from today at an interest of 13% B R135 6907 What is the growth rate of the ffg: year Cash flow 2017 4300 2016 3000 2015 1900 2014 1700 A 23% NB: PV =-1700 B 26% FV= 4300 C 33% N=3 (DON’T COUNT Y1) D 36% 8 Pg 113 The PV of the cash flow is expected to total R180 000. The PI is 1.40. Cal the initial investment PI = total present values of the net cash flows initial investment A R127 562.43 INITIAL INVEST = total present values of the net CF B R128 571.43 PI C R142 857.14 D R147 857.14 9 See Q8 set 2 10 Calc the PV of R 100 000 received 9yrs ago at an interest of 12% A R27 895 B R36 061 C R37 980 D R43 998 11-CH6 See Q11- Set 1 12 Pg 113 The PI & NPV give different solutions to accept-reject decisions TRUE/FALSE. The PI & NPV give same solutions to accept-reject decisions 13 Pg 166 SG 37 The minimum return must be earned on a project in order to leave the firm’s value unchanged is the… A Compound rate B Interest rate C Discount rate/ opportunity cost /or weighted average D Internal rate of return 14 Pg 113 BB Ltd has made an initial investment of R500 000 on a new project. The firm’s cost of capital is 12%. The investment is expected to generate the ffg. Cash inflows: Y1 (50 000) Y2(60 000) y3(150 000) Y4 (140 000) Y5(500 000). The PI is… thus the should be A 1.14-not to be taken B 1.14- To be taken >1 or =0 SHOULD BE ACCEPTED C 1.29- To be taken D 1.29- not to be taken 15-CH7 16 Owners' equity = total assets – liabilities TRUE/FALSE 17 Pg 121 SG 42 A tax adjustment must be made in determining the cost of… A Long-term debts B Common shares C Preferred Shares D Retained shares 18 See set 1 Q15 19-CH 8 SG PG The conversion of current assets from inventory into receivables and into cash provides the… of cash to pay A outflow: inflow B use: source51 liabilities, which represent a (an) …of cash C source: use D inflow: outflow 20 134 A firm with a conversion cycle of 50 days can stretch from 15 to 30 days. This will result in a/an A decrease of 15 days in the CC cycle B increase of 10 days in the CC cycle C decrease of 30 days in the CC cycle D increase in 15 days in the CC cycle 21 During the past year a firm received cash from clients amounting to R11 000. The firm paid creditors & employees R3 900. Interest paid was R1 200. No dividends. Paid normal tax of R500. The cash flow from operations amount to: A R 7 100 B R 4 500 C R 4 600 D R5 400 22 A company has a cash conversion cycle of 50 days. Annual outlays are R9mil and the cost of negotiated financing is 9%. Calculate its annual savings if the company reduces its average age of inventory to 15 days. 360 days a year. A R15 679 (9mil/360)X 15x0.09=R33 750 B R37 778 C R87 750 D R99 500 ?? error ?? 23 Pg 148 Credit terms of 3/11 net 30 are set for a business. These terms imply A a 3% discount if paid within 11 days, otherwise the balance is due in 30 days. B that the bond must be amountised before 2 Ocotber C The lease agreement expires 10 October D a 2% discount if paid within 30 days otherwise the balance is due in 10 to 30 days 24- pg 147 …. Reflect the minimum requirements for extending credit to customers. CREDIT STANDARDS 25 Pg. 148 Credit terms of 2/10 net 30 are set for a business. These terms imply… A a 2% discount if paid within 10 days, otherwise the balance is due in 30 days. B that the bond must be amountised before 2 Ocotber C The lease agreement expires 10 October D a 2% discount if paid within 30 days otherwise the balance is due in 10 to 30 days. 26 Pg 139 It takes 7 days from placing an order until stock is delivered and a firm sells 725 units a day. What is the firms re-order point? Reorder point = lead time in days x daily requirement A 1 104 units B 2 2725 units 7 X 725= C 3 732 units D 5 075 units Woolworths can reduce its Cash Conversion Cycle by: reducing the AAI and the ACP andincrease the APP Set 4 ?? Calc the PV of R100 000 received 9 yrs. From today at an interest rate of 12 %. Interest compounded monthly A R27 895 PV= R36 061.00 B R34 142 FV-R100 00 C R37 980(closest) I- 12% (monthly) D R43 998 N-9(monthly) Use advance TVM clac. ?? How much should Conner invest today at 9% interest pa, compounded quarterly to be able to buy a house worth R 2 500 00 6 yrs from today. A R672 971.33 PV= R 1 490 668.32 B R1 115 564.17 FV- R2 500 000 C R1 465 616. 71(closest) I- 9% (quarterly ) DR1 954 322. 19 n-6(quarterly) Use advance TVM clac. If Abraham invests R9 000 at the beginning of each year at an investment rate of 6.5% over 6 yrs, the FV will be A R58 687.43 FV= D B R60 000.00 PMT= - 9000 C R63 382. 42 I- 6.5 D R67 705. 83 N-6 Change calc to BEGINNING Calc the EOQ. 1600 units used annually- ordering cost is R210 per order. Carrying cost is R180 p.u per ann. A 4 units EOQ = 2X(FXS) 2X (1600X210) B 43 units 180 180 C 52 units square root 3 733.33 D 61 units ?? You invest R1 000 ann(at the end of each year) for 5 successive yrs at 9% compound interest. At the end of the 5th year you withdraw R984.71 and the balance is invested at 13% interest pa-compounded semi-annually for 4 yrs. The end value of the investment is closest to A R5 000 B R6 655 C R8 275 D R9 655 If Joel invests R50 000 in unit trust offering a return of 17% pa, calc how long it will take for the investment to reach R200 000 A 8.8 YEARS PV= - 50 000 B 10.8 FV- 200 000 C 11.4 I- 17% D 13.5 N= ASet 5 & 6 2 R2000 is invested at 7% for the 1st year -8% for the 2nd and 9% at the 3rd-compounded annually. The FV at the end of the 3rd year is closest to… A 2 519 B 2 690 C 2 794 D 2 849 Find FV-FV becomes PV for the next year Y1-2000 @7%=2140 Y2-2140 @8%=2311.2 Y3-2311.20 @9%= A 3 What amount would you invest today at an interest of 11% in order to have R125 000 in 18 yrs A R19 102.77 B R20 239.88 C R771 990.74 D R817 944.11 4 If Brett invests R5000 at the beginning of each year at an interest rate of 8% over 10 yrs. The FV would be A R 58 687.43 B R 60 000 C R 78 227.44 D R 81 000 5 Find the PV of the ffg stream of cash flows by assuming that the org has an opp. cost of 12%: YRS. 1-3 R25 000 & YRS. 4-7 R37 000 A 63 268.41 B 100 628.41 C 125 268.41 D 126 536.83 6 If you were to take a loan of R230 000 today at an annual interest of 9% & you have to pay off the loan over 5 yrs. How much will your equal annual payments to repay the loan be A 4 774. 42 B 20 700.00 C 38 431.27 D 59 131. 27 PMT= **PV= - 7 What is the growth rate of the ffg: year Cash flow 2013 4600 2012 3000 2011 1900 2010 1800 A 23% B 37% C 43% D 53% 8 Calc the FV of R35 000 invested for 6 yrs at an interest of 8% compounded semi-annually. A R14 026 B R44 106 C R56 036 D R76 7348 What is the PV of an annuity that pays R25 000 in 7 equal annual payments assuming the discount rate 13% A R80 626.52 B R94 385.61 C R110 565.26 D R124 938.75 PMT= 250 000 9 If Gerard invests R8 000 at the beginning of each year at an interest rate of 8% over a 6 yr period, the FV will be A 58 687.43 B 60 000 C 63 382.42 D 81 000 ** CLAC AT BEG **PMT=- 10 What is the PV of an annuity that pays R25 000 in 7 equal annual payments assuming a discount rate of 13% A 80 626.52 B 94 385.61 C 110 565.26 D 124 938.75 PMT 10 What is the growth rate of the ffg: year Cash flow 2013 8 567 2012 7 489 2011 6 589 2010 5 656 A 10.94% B 14.84% C 16.50 D 51.47% 11 OCT 2017 Q33 The financial manager is evaluating a proposal for a new project with the ffg cas flows: The payback period is…. year Net Cash flow 0 -R1 000 000 1 R550 000 2 R 350 000 3 R 400 000 A ONE YEAR B TWO YEARS C BET 1 & 2 YEARS D BET 2 & 3 YEARS 11 Metro has a cost of capital of 13% and is evaluating 3 capital projects. The IRR are as follows: Project IRR 1 12% 2 15% 3 13% Metro should A accept P2 & reject 1&3 B accept P2 & P3 and reject P1 C accept P1 and reject P2 &P3 D accept P3 and reject P1 & P2 SG PG38 12 BB Ltd has made an initial investment of R500 000 on a new project. The firm’s cost of capital is 8%. The A 0.7646: BE UNDERTAKEN B 0.7646: NOT BE UNDERTAKEN <1 TB pg 116investment is expected to generate the ffg. Cash inflows: Y1 (100 000) Y2(120 000) y3(80 000) Y4 (140 000) Y5(30 000). The PI is… thus the should be C 1.3079: BE UNDERTAKEN D 1.3079: NOT BE UNDERTAKEN 15 A firm has a loan with an interest of 12% . The firm is subject to a tax rate of 28%. What is the After tax cost of debt A 3.36% B 8.64% C 11.28% D 12.72% Pg 125 TB IRX(1-tax rate) 15 Is the ability to adjust sources of funds upwards or downwards in response to major changes in needs of funds FLEXIBILITY 16 See oct 2017 q29 The after tax cost of debt of a firm which has a marginal tax rate of 28% is correctly calculated at 6%. Calculate the before tax cost of debt A 6% B 7.7% C 8.3% D 10% ____IR______ (1-TAX RATE) 17 Before-tax cost of debt for a firm which has a 20% Margin tax rate, is correctly calculated at 15%. Calculate the After tax cost of debt A 15% B 13% C 12% D 11% IRX(1-tax rate) 17 A firm has a loan with an interest rate of 15%. Its subject to a tax rate of 30%. What is the after- tax cost of debt A 4.5% B 10.5% C 15% D 22.5% IRX(1-tax rate) 18 A company’s cost of capital is influenced by C Capital structure 21 A CO has a cash conversion cycle of 50days. Annual outlays are R10mil. And the cost of negotiated financing is 9%. Calc the annual savings, if the company reduces its average age of inventory by 15days. (360d/y) A R15 679 B R37 778 C R87 750 D R99 500 (10mil/360)X 15x0.09= 37 500 22 Which of the ffg are not motives for holding cash and marketable security balances A Transaction motives B Compensating Balances C Competitive motive D Speculative motive Precautionary 23 If it takes 7 days from placing an order until stock is delivered -firm sells 725 units a day-what is the reorder point A 1 104 units B 2 725 units C 3 732 units D 5 075 units Lead time in days X daily requirement 24 Calc the EOQ: 18 506 units used annually-purchased A 1 585 units Square root ofat R55 p.u. Order cost is R336 po. Carrying cost is 9% B 1 599 units C 1 614 units D 1 633 units 2X(FXS) CXP 25 A company increasing its credit terms for customers from 2/15 net 60 to 2/20 net 90 will likely experience A Higher net income B An increase of cash on hand C An increase in the APP D A decrease in the APP/ or an increase in the ACP 25 The cost of giving up cash discount under the terms of sale 4/10 net 30 is (360d/y) A 37.11% B 55.67% C 75% D 111.34% CD x 360 (1-CD) N Set 7 7 Find the PV of the ffg stream of cash flows by assuming that the org has an opp. cost of 11%: YRS. 1-3 R25 000 & YRS. 4-7 R50 000 A R71 203.41 B R100 268.41 C R155 268.41 D R174.516 13 The financial manager is evaluating a proposal for a new project with the ffg cas flows: The payback period is…. year Net Cash flow 0 -R1 000 000 1 R35 000 2 R35 000 3 R 25 000 A 2 Years B Between 1 & 2 years C 3 years D more than 3 years 14 Renmax has made an initial investment of R1000 000 on a new project. The firm’s cost of capital is 13%. The investment is expected to generate the ffg. Cash inflows: Y1 (50 000) Y2(60 000) y3(70 000) Y4 (400 000) Y5(500 000). The PI is… thus the should be A 0.66 not be taken B 0.66 be taken C 1.52 not be taken D 1.52 be taken 15 Before-tax cost of debt for a firm which has a 45% Margin tax rate, is correctly calculated at 11%. Calculate the After tax cost of debt A 4.2% B 6.05% C 9.60% D 12.06%17 A company financed 45% of it assets through 11%after tax of debt loan. The remainder is financed through equity. The required return on equity is 16%. What is the weighted average cost of capital (WACC) A11.25% B 13.75% C 28.50% D 43.56% 23 Mr Hamilton arranged for a 90 day loan at an annual interest rate of 8%. If the loan amount is R1 000 000, how much interest in Rands will he pay (365/1) A R0 B R19 726.03 C R20 000 D R80 000 a. FV = 1 080 000 PV-1 000 000 I-8%(Q) N-1(Q) b. PV-FV=D Set 8 5 If R50 000 in a fund offering a rate of 15% pa. Approximately how many years it will take the investment to reach R100 000 A 4 years B 5 years C 7 years D 13 years PV= -50 000 FV= 100 000 I= 15% N= B 18 ----- refers to the compatibility of the types of funds used in relation to the nature of the assets financed Suitability Pg 124 CH 7 25 A company increasing its credit terms for customers from 2/15 net 60 to 2/20 net 90 will likely experience A Higher net income B an increase in cash in hand C an increase in the Average collection period D a decrease in the average collection period What is the PV of an annuity that pays R12 500 in 5 equal payments assuming a discount rate of 7% A R 89 12.33 B R51 252.47 C R52 606.24 D R 72 329.67 PMT- 12500 I-7% N-5 PV= B Set 9 A2 -2019 Customer care LTD has determined its optimal capital structure comprises the ffg: the WACC is Form of capital weight After tax cost Long-term debt 40% 6% Pref shares 20% 10% A 5.3 % B 6.2 % C 8% D 9.1% 40 X 0.06 20 X 0.10 40 X 0.09Ordinary shares 40% 9% The after tax cost of debt of a firm which has a marginal tax rate of 35% is correctly calculated at 6%. Calculate the before tax cost of debt A 6% B 8.1% C 9.2% D 17.1% IRX(1-tax rate) Copy Q 24 of 2019 A2 A R179 800 B R184 300 C R 188 100 D 190 480 Copy Q 25 of 2019 A2 A R21 211 B R31 234 C R34 678 D R54 980 Copy Q 26 of 2019 A2 A R84 211 B R94 211 C R100 234 D R201 234 Calc the EOQ: 19 000 units used annually-purchased at R60 p.u. Order cost is R336 po. Carrying cost is 9% 1 300units A firm with a conversion cycle of 50 days can stretch from 15 to 30 days. This will result in a/an A decrease of 10 days in the CC cycle Riseshine LTD has determined its optimal capital structure comprises the ffg: the WACC is Form of capital weight After tax cost Long-term debt 60% 4% Pref shares 20% 13% Ord shares 20% 10% 7.0% Long term debt is scheduled to mature in a period exceeding 5 yrs True/False The IRR approach is the best to evaluate feasibility of a project True/False [Show More]

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