Financial Math Answers

When pacific inc. Bid for a project with the government the company was offered the following two payment options

a) A payment of $540,000 at the end of 5 years. Which is the scheduled completion time for the project

b) $80,000 paid upfront at the beginning of the project and the balance payment in 5 years.

If the two payments are financially equivalent and the interest rate is 6.00%

Compounded quarterly. Calculate the balance payment offered in ( option b) round to the nearest cent

An investment of $ 18,000 is growing at 5% compunded quarterly

a) calculate the accumulated amount of this investment at the end of year 1 Round of the nearest cent

b) if the intrest rate changed to 3% compounded monthly of the year 1, calculated the accumulated amount of this investment at the end of year 2 round of the nearest cent

c) Calculate the total amount of interest earned from the investment during the 2 year- period round of the nearest cent.

Calculate the effective interest rate for each following normal interest rates

a) 3% compounded quarterly. Round to two decimal point

b) 3% compunded month. Round to two decimal point

a) You are provided with the following information relating to V ltd

Equity and liabilities

12% debentures (shs1000 at par) 16,000

10% preferences shares 6,250

Ordinary shares (Shs 10 par) 12,500

Retained earnings 28,125

Additional information

i. The debentures are currently selling at Shs 950 in the market

ii. Company paid a dividend of Shs 5.00 per ordinary share and they are expected to grow at a rate of 10% per annum.

iv. The corporation tax is 40%

Required

Effective Cost of debt (3 marks)

Cost of equity (3 marks)

Weighted Average cost of capital (4 marks)

The continuous compounding rate is 13,974% per year. The equivalent nominal rate, compounded quarterly, is

A company is considering an investment proposal to install new milling controls. The project will cost Kshs 50,000,000. The facility has a life expectancy of five years and no salvage value. The company’s tax rate is 40%. The estimated cash flows from the proposed investment proposal are as follows:

Year                         CF Kshs 000

1                                       13,000

2                                       14,000

3                                       18,000

4                                       23,000

5                                       25,000

Compute:

a.     Accounting Rate of Return                                         (2Marks)

b.     Discounted payback period at 6% discounting factor                        (4 Marks)

c.     Net present value at 15% discounting factor and advise management on the project’s feasibility                                                                ( 4 Marks)

Kagiso wants to buy a new gaming computer for R40 000.He decides to save by depositing an amount of R400 quarterly into an amount earning 16% intrest per year, compounded quarterly. Thr approximate number of quarter's it will take kagiso to have R40 000 available is?

Q2: Marres limited has the following demand and cost functions

Demand function: P=80-3Q, where P is the unit selling price and Q is quantity in thousands

Cost function: TC=Q2+20Q+100, where TC is total cost in Ksh 000000

Required:

Optimal price to maximize profit (3mks)

Maximum profit (2mks)

: a) Outline the various ways of dealing with uncertainity in cost volume profit analysis (4mks)

b) Vast company limited manufactures a single product Zoe.

The following standard cost apply in its business

Standard weight to produce one unit 12kgs

Standard price per kg sh 9

Standard hours to produce one unit 10

Standard rate per hour sh 4

Actual production and costs for one accounting period were as follows:

Material used 3770kgs

Material costs sh 35,815

Hours actually worked 2,755

Hours paid for 2,900

Wages paid sh 11,571

The actual output was 290 units

Required:

Calculate the relevant material and labour variances (6mks)

a)     A sole trader fixes his prices to achieve a gross profit percentage on sales revenue of 40%. All his sales are

for cash.  He suspects that one of his sales assistants is stealing cash from sales revenue.

His trading account for the month of June 20X3 is as follows:

$

Recorded sales revenue 181,600

Cost of sales 114,000

Gross profit    67,600

Assuming that the cost of sales figure is correct, how much cash could the sales assistant have taken?  (3 marks)

b) The profit earned by a business in 20X7 was $72,500. The proprietor injected new capital of $8,000 during

the year and withdrew goods for his private use which had cost $2,200.

If net assets at the beginning of 20X7 were $101,700, what were the closing net assets? (3 marks)

c) Explain the uses of cash flow statements. (4 Marks)

d) Outline and explain the three types of capital reserves. (6 Marks)

e) Explain using examples the various categories of financial ratios. (4 Marks)