Finance Answers

3.

a)   Discuss how asymmetric information affects lending/borrowing.       (12 marks)

b)   Discuss the solutions to the moral hazard problem in debt markets.  (13 marks)

Section A - Question 1 Variance Analysis

Number of notebooks

30,000

Selling price

£24 per notebook

Variable costs

  Direct material standard costs

2 square meter of paper input allowed per unit;

£0.40 per square meter paper

  Direct labour standard costs

4 min of manufacturing labour allowed per unit;

£30/h

Total fixed costs

£500,000

The actual results for April were:

Number of notebooks

 20,000.00

Revenues

 500,000.00

Variable costs

  Direct material

£16,650, 1.85 sqm per notebook, £0.45 per sqm

  Direct labour

 £44,000.00 , 4 min of manufacturing labour, £33/h

Total fixed costs

£595,000

a) Prepare a variance analysis report for April. Calculate level 2 variances for revenues, fixed costs and operating profit, as well as level 2 and level 3 variances for variable costs.

b) Comment on the results: What can management learn from Rachel’s analysis?

XYZ funds purchased a bank bill (face value=1 million) on 10th June 2020. The bill will mature in 60 days and the yield is 6.95%. After holding the bill for 40 days, the funds sold the bill at a yield of 6.5%.

a) Calculate the profit through buy and sell of this bank bill. (4.5 marks)

b) Work out the simple annual interest rate and effective annual interest rate earned by XYZ.(4 marks)

Makmak Corporation uses the Baumol Cash Management Model to determine its optimal cash balance. For the coming year, the expected cash disbursement total P430,000. The interest rate on marketable securities is P8 per transaction. What is the optimal Cash Balance of the company?

explain in two ways how a company can limit the agency cost through the payment of dividends.

North Corp. EBIT is $200. It has a debt-equity ratio of 25% and a WACC of 16%. Debt

interest is 12%. Without taxes, what is the value of the equity? What is the value of the

firm? What is the cost of equity capital?

1.Discuss the content of microfinance act of 2006

2.Discuss the legal and regulatory environment for MFIs in Kenya.

You are creating a portfolio of Stock D and Stock BW (from earlier).

You are

investing $2,000 in Stock BW and $3,000 in Stock D.

The expected return and

standard deviation of Stock D is 8% and 10.65% respectively.

The correlation

coefficient between BW and D is 0.75.What is the expected return and standard

deviation of the portfolio?

Seth transport operates a fleet of Motor Lorries. The record for Lorry-4150 reveals the

following information

Days Maintained 30

Days operated 25

Days Idle 5

Total hours operated 300

Total kms covered 2500

Total tonnage carried 200

(4 tonne – load per trip, return journey empty)

Total cost for the month 270000

Prepare a performance statement reflecting-

A Cost per day operated, cost per kilometer, cost per hour

B Cost per round trip, Tonne Km, cost per commercial tonne –km.

Note formula plus calculations are required

Discuss the practical aspects of the management accounting function briefly in the context

of the changing global management practices perspective. Student can take any example

to build around the aspects needs to be discussed?