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Course Code: MBF 848 Credit Unit: 2.
Course Title: ADVANCED EVALUATION METHOD
Time Allowed: 2 Hours.
Instructions: 1. Attempt Question 1 and any other two (2) Questions.
2. Question 1 is compulsory and carries 30 marks
while the other 2 Questions carry 20 marks each.
3. Present all your points in coherent and orderly manner.
1. a. List the FOUR classifications of Accounting Ratios known to you.
5 MARKS
b. You are to study the following two furniture stores belonging to Saka and Olu and the answer the questions which follow.
FINANCIAL STATEMENTS
SAKA OLU
N’000 N’000 N’000 N’000
Income Statements
Sales 555 750
Less Cost of goods sold
Opening inventory 100 80
Add Purchases 200 320
300 400
Less Closing inventory (60) (240) (70) (330)
Gross profit 315 420
Less Depreciation 5 15
Wages and Salaries 165 220
Other expenses 45 (215) 35 (270)
Net profit 100 150
Balance Sheets
Non-current assets
Equipment at cost 50 100
Less Depreciation to date (40) 10 (30) 70
Current assets
Inventory 60 70
Account receivable 125 100
Bank 25 210 12.5 162.5
Total assets 220 252.5
Current liabilities
Account payable (104) (100.5)
Net assets 116 152
Financed by:
Capitals
Balance at start of year 76 72
Add Net profit 100 150
176 222
Less Drawings (60) (70)
116 152
Required:
20 MARKS
5 MARKS
5 MARKS
b. Explain the basic steps in the Asset Conversion Cycle.
15 MARKS
3. a. List the Traditional Criteria of Capital Investment Decision. 2 MARKS
b. Ogba Limited having a project which involves immediate cash outlay of N200,000.00. The company estimates that the net cash inflows from the project will be as follows:
Year Cash flow (N)
1 20,000.00
2 40,000.00
3 220,000.00
4 80,000.00
Calculate the payback period for the above project.
14 MARKS
c. State the Decision Rule for this method of Investment Decision. 4 MARKS
4. a. How would you measure a firm’s cost of retained earnings or equity?
5 MARKS
b. You are given the following capital structure of a firm.
Source of Finance Amount (N) Proportion
Equity share capital 2,250,000 45%
Retained Earnings 750,000 15%
Preference share capital 500,000 10%
Debt issues 1,500,000 30%
5,000,000 100%
The firm’s after-tax component cost of the various sources of finance are as
Follows:
Source Cost
Equity share capital 15%
Retained Earnings 12%
Preference share capital 10%
Debt issues 8%
Determine the firm’s Weighted Average Cost of Capital [WACC].
15 MARKS
5. a. List the 5 stages of a Project Cycle. 5 MARKS
b. Discuss all the stages listed in (a). 15 MARKS
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You can now use you matric number to login as your username and password in a lowercase.
https://elearn.nouedu2.net/login/
Note that you are to change your passw...
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