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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
JULY 2018 EXAMINATION
COURSE CODE: BFN303
CREDIT UNIT: 3
COURSE TITLE: FINANCIAL MANAGEMENT
TIME ALLOWED: 3 HOURS
Instructions:
- Question number 1 is compulsory and carries 25 marks while the other 3 questions carry 15 marks each. Present all your points in coherent and orderly manner.
- Attempt question number one (1) and any other three (3).
1a. Discuss five (5) objectives of a business firm in Nigeria
1b. Define the following terms:
i. Financial management
ii. Finance
iii. Cost of capital
iv. Weighted cost of capital
v. Capital budgeting decision
(25 marks)
2. Projects A and B have the following relevant information:
|
|
Project A ( |
Project B ( |
|
Outlay |
200,000 |
200,000 |
|
Inflows: Year 1 |
60,000 |
80,000 |
|
Year 2 |
80,000 |
80,000 |
|
Year 3 |
80,000 |
10,000 |
|
Year 4 |
100,000 |
60,000 |
|
Year 5 |
- |
60,000 |
Required: Compute the payback Period for the two projects and recommend the better one
(15 marks)
3a. Differentiate between Shareholders fund and Borrowed Funds.
3b. A project has the following expected cash flow over its four (4) years life: Year 1 to year 4 are: 8000, 4000, 6000, 6000 respectively and the cost of the project is N17,800 at 12% discount rate.
Required: Calculate its Net Present Value (NPV) and Profitability Index (P.I.)
(15 marks)
4. Seyi ventures have the following data in respect of a particular stock item;
Maximum Usage 1,350 units per week
Minimum Usage 600 units per week
Average Usage 1050 units per week
Lead Time 3 – 4 weeks
EOQ 6,300 units
Required; Calculate
i. The re-order level
ii. Minimum level
iii. Maximum level
4b. Differentiate between Under Capitalization and Over Capitalization of the Working Capital Management
(15 marks)
5a. Discuss the two important statements of the financial statement
5b. State 5 reasons why firms prepare financial statement
(15 marks)
6a. Explain the concept “Mergers and Acquisitions”
6b. State four reasons for “Mergers and Acquisitions”
6c. Discuss two (2) forms of business combinations (15 marks)
