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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: BFN 805 CREDIT UNIT: 2
COURSE TITLE: CORPORATE FINANCE
TIME ALLOWED: 2 HOURS
Instructions:
- Question number 1 is compulsory and carries 30 marks while the other 2 questions carry 20 marks each. Present all your points in coherent and orderly manner.
- Attempt question number one (1) and any other two (2).
1a. What is an Income Statement? 5 marks
- 1b. Abua Ltd. Has the following activities for the period ended 31st December, 2017 as presented below:
|
ACTIVITY |
|
|
Revenues (Turnover) |
5,500,000 |
|
Cost of Goods sold |
3,250,000 |
|
Depreciation |
150,000 |
|
Selling Expenses |
250,000 |
|
Administrative Expenses |
195,000 |
- Calculate Earnings Before Interest and Taxes (EBIT).
With the additional information
|
Interest Expenses |
125,000 |
|
Taxes |
55,000 |
- Prepare a Net Income Statement Before Extraordinary Items for the year ended 31st December, 2017.
Additional information
|
ACTIVITY |
|
|
Gains From Discontinued Operations |
250,000 |
|
Extraordinary gains |
185,000 |
|
Net Income Statement After Extraordinary Items |
|
- Prepare a Net Income Statement After Extraordinary Items for the period under consideration.
- If
N150,000 Preferred Dividend has been provided for, then prepare a Statement of Profit to Ordinary Shareholders. 25 marks
2a. Discuss the three major key risks associated with cost of capital. 6 marks
2b. Discuss the three main types of securities. 14 marks
3a. For a firm to establish a Dividend Policy, some tradeoffs exist. Briefly discuss these tradeoffs. 4 marks
3b. In the light of the existing tradeoffs, discuss any four (4) determinants of Dividend Policy. 16 marks
4a. On the basis of John Maxwell’s Developing the Leaders Around You, discuss any five questions concerning organisational growth. 15 marks
4b. What do you think could be the benefits of organisational growth? 5 marks
5a. In what three (3) ways can a firm acquire another? 6 marks
5b. Define the major risks associated with international investment? 6 marks
5c. As a firm enters into a transaction that exposes it to cash flows in foreign currency and also ventures into other countries, two major risks are involved. The manager can leave the firm exposed to these risks, or the manager can hedge the risk. This choice cannot be made without considering some factors. Discuss any two of these factors? 8 marks
