LADOKE AKINTOLA UNIVERSITY OF TECHNOLOGY, OGBOMOSO FACULTY OF MANAGEMENT SCIENCES MBA FINANCE OPTION THIRD SEMESTER

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1 LADOKE AKINTOLA UNIVERSITY OF TECHNOLOGY, OGBOMOSO FACULTY OF MANAGEMENT SCIENCES MBA FINANCE OPTION THIRD SEMESTER MGS 733- FINANCIAL ANALYSIS AND THEORY 1. The management of RCC Nigeria Ltd. Is planning to invest in either of the two investment proposals with the following cash flow: Year Cash Flow (project A) Cash Flow (Project B) N' 000 N , Both projects will cost N10 Million each. The residual value of project A is N150,000 while that of project B is N160,000. However, the Benefactor of project A is 1.5 while that of project B is The expected return on the market: s current!) 21% and treasury bills currently yield 15%. i. Explain the concept of Capital Asset Pricing Mode! in project evaluation. ii. Calculate the required rate of return for each project using the Capital Asset Pricing Model. iii. As a financial adviser to RCC Nig Limited. \\hich of the two projects will you recommend if you adopt the net present value approach in your appraisal process and the required rate of return calculated in ii above is used as the discount factor.- 2. Royal Crown Motel intends to carry out three important extension projects to improve its services. The projects under consideration are: i. Restaurant. ii. Suite iii. Swimming Pool. Each project will cost 1 million naira and only N2 million has been budgeted for capital investment. As a result, a choice has to be made as to which are the best extension projects to undertake. Details of the three projects are as follows: Project Expected Return Standard Deviation Restaurant 20% 10% Suite 15% 8% Swimming Pool 18% 9%

2 Correlation Coefficients: Restaurant and Suite Restaurant and Swimming pool Suite and Swimming pool The risk-free interest rate is 10% and the market return is 17% Use Portfolio Theory to analyze the investment decision facing Royal Crown Motel. 3. LAUTECH Ventures limited is considering investment in a project estimated at "NI5million. The consultant report provided that the residual value of the equipment to be purchased in respect of the project was estimated to be N750,000 and the estimated cash flows for three different situations expected and their associated probabilities were presented to the board as follows: Most Stable Stable Normal Year Cash flows Prob Cash flows Prob Cash flow prob N 000 N 000 N , , , , , , , , , , , , , , , , , , A probability of 1 was assigned to the residual value of the equipment purchased for the project. The risk free rate in the economy is 15% and the market rate of return is 20%. MGS 737- CORPORATE FINANCE 1. The following information has been made available to you in respect of two companies, Maryland Limited and Salvation Limited. Maryland Ltd Salvation Ltd Ordinary Shares 5, ,000,000 Mar vet Value #2.50 #11.50 P/E Ratio 12 6 Maryland Limited proposes to acquire Salvation Limited by means of a share for share exchange at a ratio equivalent to #1.60 for each share in Salvation Limited. The lake-over is to be carried with the intention of increasing earnings per share which it is supposed w i l l be to the advantage of current shareholders

3 in Maryland Limited. (i) What will be the LPS of Maryland Ltd after acquisition? (ii) Would you advise a take-over on this basis? (iii) Mutually dependent projects and Mutually Exclusive projects 2a. Clearly distinguish between the following concepts: i) Business Risk and financial Risk, ii) Risk and Uncertainty ii) Mutually dependent projects and Mutually Exclusive projects b. What is cost of capital? c. State four (4) assumptions of dividend valuation model. d. Differentiate between financial and non-financial information. 3. Relevant information for two companies for the year ended 30 September 2011 was as follows: X Y N 000 N 000 Sales Revenue 50, ,000 Profit before tax 10,000 10,000 Capital employed 50,000 50,000 Taxation 30% Prepare the following ratios for both companies and comment on the results: (a) Return on capital (b) Operating profit margin (c) Asset turnover ii) State three (3) limitations of ratio analysis. MGS 743- INTERNATIONAL BUSINESS FINANCE la. Explain the significant importance of the following concepts to International Business Finance (i) Globalization (ii) Trade Liberation (iii) Trade Restrictions (iv) Trade Retaliation b. What are the critical challenges as well as major limitation of Globalization process to the third world economies?

4 2. LAUTECH LTD, a Nigerian company, exports goods to the Net-herlands which cost N The selling price is Japanese yen 120,000. At the time of the export sale, the exchange rate for Japanese Yen against naira was: LAUTECH LTD sells its foreign currency income as soon as it is received, at the sport rate. The overseas buyer is given three months' credit. (a) What was the expected profit on the export sale? (a) What would the actual profit be if the spot rate at the time when the current is received has moved to: Comment on your figures. 3i. What do you understand by Eurocurrency market and Eurocurrency loans ii. Discuss five (5) major types of Eurocurrency loans. iii. Enumerate the significant effects of Eurocurrency loans to International Business Financing. MGS 739- ADVANCED FINANCIAL MANAGEMENT 1a. Alowonle Nig. Ltd is financed by N10 million, Nl ordinary shares currently valuedat174k each. Dividend amounting to N2.4m is also to be paid. The company is also financed with 9%, N10million irredeemable debenture currently valued at N75 each. Interest having recently been paid by the company. You are required to compute the cost of constituent capital and the weighted average cost of capital. b. What is the significance of the Cost of capital concept? 2a. Explain the Roles of preference shares as a source of long term funds. b. In what ways can this financing medium be made attractive to investors'? c. Describe the advantages of debt sources in long term financing. 3a. Financial Planning is a comprehensive process involving strategic considerations. Explain. b. Highlight five stages of the financial planning process c. Do all mergers and acquisition produce synergy? Why do mergers and acquisitions fail.

5 MGS 741- SECURITY PRICING AND PORTFOLIO SELECTION 1. A financial analyst is analyzing two investments alternatives Akrix (Automobile) and Yulag (Distribution Trade). Estimated rates of returns and their chances of occurrence in the next year are given in the table below: Prob. Rate of Return Akrix % Yulag % (a) Determine each alternative investment rate of return, variance and standard deviation (b) If the financial analyst wishes to invest equally in both investment would the resulting portfolio have reduced risk (c) Assume the beta of the resulting portfolio is 0.81 what is the implication of this relative to the market return. 2a. Brillant Bukky, an investment analyst manages three basic investment fund namely Avocado: Otuoke's Pearl and Katsina Stallion in the last six months of Risk-free rate is assumed 9%. Table below present risk-return indicators of the funds

Institute of Certified Management Accountants of Sri Lanka. Strategic Level November 2012 Examination. Financial Strategy and Policy (FSP / SL 3-403)

Institute of Certified Management Accountants of Sri Lanka. Strategic Level November 2012 Examination. Financial Strategy and Policy (FSP / SL 3-403) Copyright Reserved Serial No Strategic Level November 2012 Examination Examination Date : 10 th November 2012 Number of Pages : 06 Examination Time: 9.30 a:m. 12.30 p:m. Number of Questions: 05 Instructions