Finance Answers

On 1 Jan 1998, the Katito Sand Co sent to M. Mutiso 1,000 tonnes of sand the pit cost being Sh100 per tonne. The company paid Sh10,000 towards freight and insurance. Mutiso took delivery of the consignment on 10th January 1998 and immediately accepted a bill drawn on him for Sh50,000 for 2 months. On 31st March (when the company’s books are closed) the consignee reported that:

i) There was a shortage of 50 tonnes on the whole consignment due to loading and unloading;

ii) 800 tonnes were sold at sh130 per tonne

iii) He had incurred the following expenses:

- Godown rent Sh500

- Insurance Sh500

- Selling expenses Sh1,000

iv) He had deducted his commission (4% of sales) and remitted the balance due by bank draft on 31 March 1998.

Required: Show the necessary accounts in the books of Katitu Sand Co. to record the above transactions.

What is the Marshall-Lerner condition for a stable foreign exchange market? For an

unstable market? For a depreciation to leave a nation’s Balance of Payment unchanged?

Explain expenditure-changing and expenditure-switching policies. Using the swan diagram, explain how these policies can be used to achieve external and internal balance.

Assuming that Nations 1 and 2 are both large and starting from the equilibrium level of

national income and equilibrium in the trade balance in Nation 1 and given that 𝑀𝑃𝑆1 = 0.20; 𝑀𝑃𝑆2 = 0.15; 𝑀𝑃𝑀1 = 0.20 𝑎𝑛𝑑 𝑀𝑃𝑀2 = 0.10, find the change in the

equilibrium level of national income and the trade balance in Nation 1 for:

a) An autonomous increase in the exports of Nation 1 of 200 that replaces domestic

production in Nation 2

b) An autonomous increase in investment of 200 in Nation 1

c) An autonomous increase in investment of 200 in Nation 2.

Given that 𝐶 = 100 + 0.8𝑌; 𝑀 = 150 + 0.2𝑌; 𝐼 = 100 𝑎𝑛𝑑 𝑋 = 350,

a) Determine the equilibrium income

b) Show the results on two graphs with (i) Injections and leakages on the vertical axis

(ii) Net injections and net domestic leakages on the vertical axis

c) Determine the new equilibrium and show on graph when there is;

i. An increase in X and I of 200

ii. A decrease in M of 100

iii. A decrease in S and M of 100

Assume inflation in Turkey is 50% and 2% in the US. Using the relative PPP, 

a) Calculate the exchange rate (𝑅 = 𝑇𝐿/$) and the exchange rate (𝑅 = $/𝑇𝐿).

b) Assume that the Turkish inflation increases to 100% while the US inflation remains at 2%, calculate the new exchange rate between the Turkish Lira and the US dollar.

What is the reason of having more non executive directors than executive directors? 5marks

Mention and explain three different types of cheques that the bank can issue. 5marks

1.What is the difference between real property and personal property? 5marks

2. What are two functions of the security acquired by the bank? 4marks

3. A bank has implied and common law rights in it's relationship with the customer, highlight and explain five rights that the bank has. 10marks

Smart Toys, currently has no debt, expects an EBIT of $45,000 every year forever. Its cost of equity is 16 percent. The corporate tax rate is 30 percent. The company can borrow at 8 percent.

a.​What is the current value of the company? 

b.​What will the value of the firm be if the company takes on debt equal to 20 percent of its unlevered value? What if it takes on debt equal to 60 percent of its unlevered value? 

c. ​What will the value of the firm be if the company takes on debt equal to 55 percent of its levered value? What if the company takes on debt equal to 40 percent of its levered value?