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NATIONAL OPEN UNIVERSITY OF NIGERIA
UNIVERSITY VILLAGE, PLOT 91, CASDASTRAL ZONE, NNAMDI AZIKIWE EXPRESS WAY, JABI, ABUJA.
FACULTY OF MANAGEMENT SCIENCES
MARCH/APRIL 2015 EXAMINATION
COURSE CODE: ACC415
CREDIT UNIT: 2
COURSE TITLE: FINANCIAL MANAGEMENT
TIME ALLOWED: 2 hrs
Instructions: 1. Attempt question Number one (1) and any other two (2).
2. Question number 1 is compulsory and carries 30 marks, while the other questions carry 20 marks each
Present all points in a coherent and orderly manner
QUESTION 1
For an investment project, the following initial estimates have been made:
Initial outlay on equipment N100, 000
Sales price N30
Unit cost N20
Discount rate 10% per annum
Life of project 3 years
Sales volume (units)
Year 1 N4, 000
Year 2 N6, 000
Year 3 N3, 000
The equipment will manufacture a product at the above-stated unit cost and selling price in the volumes indicated. Calculate the maximum tolerable unfavourable changes as a percentage of the original estimated value in:
a) Sales price
b) Unit cost
c) Sales volume
d) Initial outlay. 30 Marks
QUESTION 2
2a) Explain the Expected NPV 3 Marks
2b) A company runs a project for three years with the following distribution of returns in each year.
|
Year 1 |
Year 2 |
Year 3 |
|||
|
Return |
Probability |
Return |
Probability |
Return |
Probability |
|
N 000 |
N 000 |
N 000 |
|||
|
10,000 |
0.1 |
20,000 |
0.4 |
10,000 |
0.3 |
|
12,000 |
0.6 |
30,000 |
0.6 |
16,000 |
0.5 |
|
16,000 |
0.3 |
20,000 |
0.2 |
||
The project will cost the company ₦42 Million to establish. Calculate the expected NPV if the discount rate is 10% 17 Marks
QUESTION 3
3a) Explain properly 7 factors that influence working capital needs of firms. 14 Marks
3b) Give 6 dangers of inadequate working capital 6 Marks
QUESTION 4
4a) In relationship to capital budgeting, what is the difference between risk and uncertainty? 5 Marks
4b) What are the steps in strategic financial decision-making? 6 marks
4c) In resolving the issue of risk and uncertainty, various techniques are applied to analyse their effect on capital investment decisions. List some of the techniques applied. 9 Marks
QUESTION 5
5a) In order to determine the mix of short-term and long-term sources in financing current assets a firm usually follows certain approaches. List and explain them. 6 Marks
5b) List four factors to consider when using reserves to finance a company’s long-term investments. 4 Marks
5c) List 10 qualitative factors to be considered in capital investment decisions 10 Marks
