Finance Answers

Q.

On 31st December, 2012, the bank column of TNT's cash book showed a debit balance of RM1,500. The monthly bank statement written-up to 31st December, 2012 showed a credit balance of RM2,950.

On checking the cash book with the bank statement, it was discovered that the following transactions had not been entered in the Cash Book:

i) Dividend of RM240 had been paid directly to the bank.

ii) A credit transfer - customs and Excise refund of RM260 - had been collected by the bank.

iv) A direct debit of RM70 for the AVON subscription had been paid by the bank.

v) A standing order of RM200 for TNT's loan repayment had been paid by the bank.

vi) TNT's deposit account balance of RM1,400 was transferred into his bank current account.

ii) Cash of RM90 and cheques amounted RM600 had been paid to the bank on 31st December, 2012 but were not credited by the bank until 2nd January, 2013.

required:

a) update the Cash Book (Bank Colum).

b) Prepare a Bank Reconciliation Statement

What is the value of the expenditure multiplayer

What are the primary financial markets? Why is it critically important for the effective operation of the primary markets to have well-developed secondary markets where investors can trade with confidence?

4.3 REQUIRED

Study the information given below and answer the following questions:

4.3.1 Calculate the net present value. (7)

4.3.2 Should ABC Limited consider acquiring the machine? Explain. (1)

4.3.3 Calculate the value of the initial investment at the end of five years, if it is

invested at a rate of 12%.

(2)

INFORMATION

The project manager of ABC Limited is contemplating the import of a machine in order to expand

the production capacity at one of its projects. The estimated cost of the machine is R500 000 and

the revenues from the sales it is expected to generate are R350 000 per year for four years. The

cash costs associated with the project are estimated at R150 000 per year. The machine is

expected to have a scrap value of R50 000. The cost of capital is 12%.

4.2 REQUIRED

Study the information given below and answer the following questions:

4.2.1 Calculate the project’s Internal Rate of Return (answer expressed to two

decimal places).

(6)

4.2.2 Should the company consider investing in the project? Why? (1)

INFORMATION

Demat Limited is considering an investment in a project that costs R260 000 and should result in

cash savings of R81 000 per year for five years. The company’s cost of capital is 15%.

List in (bullet points) the process you would follow when attempting an inflation and risk adjusted NPV

analysis. This includes cash flow identification and possible adjustments to cash

flows; also outline the most accurate discount rate to use.

Eggs Ltd., an egg producing farm, requires short term financing and are

consulting with you for advice on which financing option to choose to fund its

purchases of feed for its hens. An operations consultant determined that the

standard deviation of feed use on a monthly basis is 33%, with January feed use

being the lowest at 1 ton and November being the highest at 2 tons. The farm

manager has found two options, a revolving credit facility at a rate of 5% per

annum with interest payable on the balance of the facility at the end of every

month OR a one- year renewable loan at a rate of 4% payable as part of the

monthly repayments on the loan.

Which loan would you advise the company to take?

(No calculations are required in this answer, though they are permissible.

Staff your answer with a brief argument for the option you reccomend)

Factors which contributes to Currency appreciation

Below are the returns for two assets;

State of nature

r1

r2

probability

Weak growth

15%

15%

1/3

Strong growth

30%

12

1/3

Very strong growth

45%

9

1/3

Expected returns

30%

12

total    1.0

Calculate the two variances and Cov (r1, r2). If assets 1 and 2 are combined 50-50 into a portfolio, what is the variance of this portfolio? Show your calculations.