Finance Answers

Pharmaniaga Berhad is in the process of selecting a better investment from two

equally risky projects. Project A and B requires initial capital of RM100,000 and

RM150,000 respectively. The cash inflows of each projects are shown below:

Year

Project A (RM)

Project B (RM)

1

35,000

45,000

2

40,000

45,000

3

50,000

45,000

4

60,000

45,000 

After graduation, you work as a Financial Analyst in a reputable multinational company in Kuala Lumpur. Your superior has assigned you a new task. You are required to analyse the following bonds.

Company. Petron Berhad Shell Corporation

Coupon rate per annum 10% 10%

Maturity in years 15 10

Face value per bond $1,000 $1,000

Yield to maturity per annum 11% 13%

Current selling price per bond $900 $1,100

Based on the above information, you are required to:

a) Compute the current bond prices for both companies if the interest payment is once a year.

b) Based on the above result, provide your conclusion.

c) Discuss three main differences between conventional bond and Islamic bond.

Nelson has been working for few years and earnings $42,000 per annum. He would like to save some of his money for his wedding. He has shortlisted his choices to the following fixed deposits:

i) Maybank Fixed Deposit (interest rate for 12months: 1.85%, 36months: 1.90%)

ii) Public Bank eFixed Deposit (interest rate for 12months: 1.85%, 36months: 1.85%)

You are required to calculate his fixed deposits account balance as at 31 December 2023 in both banks and state your recommendation with justification based on the following conditions:

a) he deposits $5,000 on 1 January 2021 and hold for three years until 31 December 2023.

b) he deposits $2,500 on 1 January 2021 and 1 January 2022.

c) he deposits $1,000 on 1 January 2021, $1,500 on 1 January 2022 and $2,500 on 1 January 2023.

Note: You are required to calculate the amount in his account after three years based on the above chosen banks latest interest rate

Consider a world consisting of two countries, Belgium and Holland. Belgium has

L=100 workers and Holland has L*=200 workers, the only input. There are two goods

– bread (B) and tulips (T).

In Belgium: MPLB=1 and MPLT =1/2, in Holland: MPL*

B = 1/2 and MPL*T =1.

(b) Draw the relative supply of bread (B/T) curve for each country. Assume that each country has the same downward-sloping relative demand for bread curve. What is the autarky equilibrium relative price of bread in each country?

(c) Now derive and draw the world relative supply of bread curve.

(d) Suppose that the relative demand for bread curve intersects with the world relative

supply curve at its vertical segment. What can you say about the trade equilibrium

relative price of bread? Which country produces which good or goods?

Is there complete specialization? Who gains from trade?

(e) How does your answer in (d) change if Holland’s population increases 10,000

times?

Consider a world consisting of two countries, Belgium and Holland. Belgium has

L=100 workers and Holland has L*=200 workers, the only input. There are two goods

– bread (B) and tulips (T).

In Belgium: MPLB=1 and MPLT =1/2, in Holland: MPL*

B = 1/2 and MPL*

T =1.

(a) Which country has a comparative advantage in which good?

(b) Draw the production possibilities frontier for each country. Draw the relative

supply of bread (B/T) curve for each country. Assume that each country has the same

downward-sloping relative demand for bread curve. What is the autarky equilibrium

relative price of bread in each country?

(c) Now derive and draw the world relative supply of bread curve.

The effectiveness of taxes as a government intervention measure to correct market failure

Consider a world consisting of two countries, Iceland and Finland. Finland has L=300

units of labor and Iceland has L*=100 units of labor, the only input.

There are two goods – fish (F) and video games (V).

In Finland: MPLF =1/2 and MPLV =1/4, in Iceland: MPL*

F =1/2 and MPL*

V =1/2.

(a) Which country has an absolute advantage in which good(s)?

(b) What is the opportunity cost of producing fish in Finland (Iceland)? What is the

opportunity cost of producing video games in Finland (Iceland)?

(c) Which country has a comparative advantage in which good?

(d) Draw the production possibilities frontier for each country. What are the

production opportunity and autarky consumption opportunity sets in each country?

(e) Draw the relative supply of fish (F/V) curve for each country.

(f) Assume that each country has the same downward-sloping relative demand for fish

curve. What is the autarky equilibrium relative price of fish in each country?

a.      Star Animators, Inc. currently makes all sales on credit and offers no cash discount. The firm is considering a 3 percent cash discount for payment within 10 days. The firm's current average collection period is 90 days, sales are 400 films per year, selling price is $25,000 per film, variable cost per film is $18,750 per film, and the average cost per film is $21,000. The firm expects that the change in credit terms will result in a minor increase in sales of 10 films per year. Assuming that 75 percent of the sales will take the discount, and the average collection period will drop to 30 days. The firm's bad debt expense is expected to become negligible under the proposed plan. The bad debt expense is currently 0.5 percent of sales. The firm's required return on equal-risk investments is 20 percent, should the proposed discount be offered? (Note: you are required to perform necessary calculations to support your answer.)

Glosm Company showed the following on its direct materials budget for June:

Units to be produced

50,000

Total kilos needed for production

4,000

Total kilos of materials to be purchased   5,000

The materials cost ₱2 per kilo. How much is the cost of direct materials per unit?

2. The direct materials budget shows:

Desired ending direct materials

20,000 kilos

Materials purchased

51,400 kilos

Beginning inventory on hand

1,200 kilos

How much is the total direct materials needed for production?

ABC Corporation has a beta coefficient of 0.88. If the risk-free rate is 4% and return on the broad market index is 8%; calculate the expected return.