+91-9519066910
CAD:+1-604-396-3267 ,IN:+91-7503070001, IN:+91-9519066910

Assignment

Computing Skills Assignment Help

Matlab Assignment Help

ECF5220 Principles of Finance

Rating:
ECF5220 Principles of Finance

 ECF5220 Principles of Finance

ECF5220 Principles of Finance – Final Exam 2/10

Suggested Answers

 

Note these are brief solutions only.  For theory questions a fuller coverage would be required in an exam

Question 1

Decision:     The NPV is positive so the project should be accepted.

Notes:

 

1.             The market research cost ($20,000) is a sunk cost and should be omitted.

 

2.             A proportion of head office costs ($10,000) are allocated overheads – not an incremental expense.

 

3.             Interest expense should be excluded as this cost is built into the discount rate used to derive the NPV. However, it is a relevant cash flow in deriving the payback period.

Question 2

 

(A) Pluto Ltd.

 

Mortgage loan:

 

PV = -$500,000             n = 8x12             i = 9%/12

 

PMT = $7,325.1016

 

PMT = $7,325.1016    n =8x12              i = 8.4%/12

 

PV = $510,786.51

 

Effective annual rate = (1 + 0.084/12)12 – 1 = 0.087311 or 8.7311%

After-tax cost = 8.7311% (1 - 0.3) = 6.1117%

 

Debentures:

 

PV = $100.50       PMT = -8%x$100/2                n = 5x2                FV = -$100

 

i = 3.9385%

 

Effective annual rate = (1 + 0.039385)2 – 1 = 0.080321 or 8.0321%

 

After-tax cost = 8.0322% (1 – 0.3) = 5.6225%

 

MV = $100.50 x 8,000 = $804,000

 

Preference shares:

kp = (5% x 20)/21 = 4.7619%

 

MV = $21 x 25,000 = $525,000

 

Ordinary shares: -

ke = 0.40(1+ 0.03)/8 + 0.03 = 8.15%

 

MV = $8.00 x 400,000 = $3,200,000

 

Cost of Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Market value

 

Proportion

 

Cost

After-tax

 

Wt Cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage loan

510,787

 

0.1014

 

8.731%

 

6.1117%

 

0.6197%

 

8% Debentures

804,000

0.1595

 

8.032%

 

5.6225%

 

0.8968%

 

5% preference shares

525,000

0.1042

 

4.762%

 

 

 

0.4962%

 

Ordinary shares

3,200,000

0.6349

 

8.150%

 

 

 

5.1744%

 

 

 

5,039,787

1.0000

 

 

 

 

 

 

7.1872%

 

 

Correct WACC = 7.19%

(B)        EOQ model determines the inventory level that minimises the total costs associated with inventory.

 

The model is based on the following assumptions:

 

Demand for the product per period is constant and known with certainty No quantity discounts are available

 

No lead time between ordering and receiving inventory

 

Explain each of the terms in the EOQ formula and the role of the model in minimising the total annual costs (i.e. acquisition costs + carrying 

 

 

 

Standard Devaiation



 DOWNLOAD SAMPLE ANSWER


   

Details

  • Number of views:
    336
  • PRICE :
    AU$ 350.00

Submit Works

Urgent Assignment Help

Our Top Experts


Karen Betty

Holding a PhD degree in Finance, Dr. John Adams is experienced in assisting students who are in dire need...

55 - Completed Orders


Daphne Lip

Canada, Toronto I have acquired my degree from Campion College at the University of Regina Occuption/Desi...

52 - Completed Orders


Mr Roberto Tuzii

Even since I was a student in Italy I had a passion for languages, in fact I love teaching Italian, and I...

102 - Completed Orders


Harsh Gupta

To work with an organization where I can optimally utilize my knowledge and skills for meeting challenges...

109 - Completed Orders


ARNAB BANERJEE

JOB OBJECTIVE Seeking entry level assignments in Marketing & Business Development with an organization...

202 - Completed Orders


KARAN BHANDARI

Current work profile Project manager- The Researchers Hub (2nd Jan 2016 to presently working) Researc...

20 - Completed Orders


Tan Kumar Ali

Sales Assistant, Mito Marina Assigned to the Stationery dept – assisted in merchandising, stock taking...

100 - Completed Orders


Wesenu Irko

Personal Profile Dedicated and highly experienced private chauffeur. High energy, hardworking, punctua...

200 - Completed Orders


Lizzy Darley

I'm Lizzy, full time education specialist in English, Essay Writing, Economics and Maths. Having Assi...

109 - Completed Orders


CRYSTAL

HSC PREPARATION I specialise in English coaching programs for HSC students. My personalised and results-...

202 - Completed Orders