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    BBB 2210 Financial Management Year III Semester II

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    JAMES MUHIA
    This document provides instructions and questions for an examination on financial management. It includes 5 questions. Question 1 has 5 parts asking about sources of business financing, features of capital investment projects, and calculations related to a sample investment project including net present value, payback period, profitability index, and internal rate of return. Question 2 addresses project implementation constraints, expected returns and risk for two securities, and coefficient of variation. Question 3 covers differences between preference and ordinary shares and another sample investment project. Question 4 includes calculations of discounted payback period, the time value of money, and factors influencing dividends. Question 5 addresses assumptions of economic order quantity, a related calculation, dangers of excess cash holdings, and motives for holding business cash.

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    BBB 2210 Financial Management Year III Semester II

    Uploaded by

    JAMES MUHIA
    26 views3 pages
    This document provides instructions and questions for an examination on financial management. It includes 5 questions. Question 1 has 5 parts asking about sources of business financing, features of capital investment projects, and calculations related to a sample investment project including net present value, payback period, profitability index, and internal rate of return. Question 2 addresses project implementation constraints, expected returns and risk for two securities, and coefficient of variation. Question 3 covers differences between preference and ordinary shares and another sample investment project. Question 4 includes calculations of discounted payback period, the time value of money, and factors influencing dividends. Question 5 addresses assumptions of economic order quantity, a related calculation, dangers of excess cash holdings, and motives for holding business cash.

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    This document provides instructions and questions for an examination on financial management. It includes 5 questions. Question 1 has 5 parts asking about sources of business financing, features of capital investment projects, and calculations related to a sample investment project including net present value, payback period, profitability index, and internal rate of return. Question 2 addresses project implementation constraints, expected returns and risk for two securities, and coefficient of variation. Question 3 covers differences between preference and ordinary shares and another sample investment project. Question 4 includes calculations of discounted payback period, the time value of money, and factors influencing dividends. Question 5 addresses assumptions of economic order quantity, a related calculation, dangers of excess cash holdings, and motives for holding business cash.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    26 views3 pages

    BBB 2210 Financial Management Year III Semester II

    Uploaded by

    JAMES MUHIA
    This document provides instructions and questions for an examination on financial management. It includes 5 questions. Question 1 has 5 parts asking about sources of business financing, features of capital investment projects, and calculations related to a sample investment project including net present value, payback period, profitability index, and internal rate of return. Question 2 addresses project implementation constraints, expected returns and risk for two securities, and coefficient of variation. Question 3 covers differences between preference and ordinary shares and another sample investment project. Question 4 includes calculations of discounted payback period, the time value of money, and factors influencing dividends. Question 5 addresses assumptions of economic order quantity, a related calculation, dangers of excess cash holdings, and motives for holding business cash.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 3

    UNIVERSITY EXAMINATION 2021/2022

    EXAMINATION FOR THE DEGREE OF BACHELOR OF


    TECHNOLOGY IN CONSTRUCTION AND PROPERTY MANAGEMENT
    BBB 2210 Financial Management Year III Semester II

    Date: Tuesday, 21st June 2022 Time: 1.30pm – 3.30pm


    INSTRUCTIONS
    Answer question One (Compulsory) and any other Two questions.
    QUESTION ONE
    a) Explain five Sources of finances to a newly established business (5 marks)
    b) Explain five features of capital investment projects (5 marks)
    c) A firm is considering investing in a project that that promises to generate the
    following earnings before depreciation and tax for the next six years.
    Year Cash flows (Ksh)
    1 15,800
    2 16,000
    3 28,000
    4 38,500
    5 16,600
    6 20,000
    Given that the initial capital of the project will be ksh.20, 000 and required rate of
    return is 10%.
    Required
    i) Determine the cash flows of the project (5 marks)
    ii) The Pay Back period of the project (3 marks)
    iii) Using the Net Present Value (NPV) approach. Advice whether the firm should
    invest the project or not. (5 marks)
    iv) The Profitability Index (2 marks)
    v) The internal Rate of return of the project (5marks)

    Page 1 of 3
    QUESTION TWO
    a) Explain the three major constraints that hinder successful project implementation
    (5 marks)
    b) The following information relates to two securities namely M and N which have
    the following characteristics.

    Probability Returns (M) Returns (N)


    0.1 10% 15%
    0.4 5% -12%
    0.2 14% 6%
    0.3 -7% 5%
    Required:
    i) Compute the expected return of each security and comment on the best
    security to purchase (5 marks)
    ii) Compute the level risk in each security and advice(5 marks)
    iii) Compute the co-efficient of variation for each security and comment
    (5 marks)
    QUESTION THREE
    a) Explain five differences between preference and ordinary shares (10 marks)
    b) A firm is considering investing in a project that promises to generate the following
    profits before tax for the five years.
    Year Cash flows (Ksh)
    1 5,800
    2 6,000
    3 8,000
    4 8,500
    5 6,600
    Given that the initial capital of the project will be ksh.20, 000 and required rate o et
    12%.
    Required
    i) Determine the cash flows of the project (5 marks)
    ii) The Discounted Pay Back period of the project (5 marks)

    Page 2 of 3
    QUESTION FOUR
    a) An initial investment of Sh.2, 324,000 is expected to generate Sh.600,000 per year
    for 6 years.
    Required
    Calculate the discounted payback period of the investment if the discount rate
    is 11%. (5 marks)
    b) Explain the concept of the "Time value of money" and justify why "a shilling
    earned today is better than a shilling earned tomorrow" (5 marks)
    c) An investor wishes to receive ksh. 100, 000 after three years. Assuming that
    the rate of interest is 7%, how much money should he invest today?
    (5 marks)
    d) Explain five factors that influence dividends payable by a firm (5 marks)

    QUESTION FIVE
    a) i) Explain four assumptions that are made in determination of Economic Order
    Quantity (EOQ) (5 marks)
    ii) Assume that the annual demand of shoes in a boutique is 2,000pairs per month.
    The cost of placing an order is sh. 12 per order and holding cost is sh.40.
    Required:
    Compute the Economic Order Quantity (5 marks)
    b) Explain five dangers of holding excess cash in a business (5 marks)
    c) State and explain three motives for holding cash in a business (5 marks)

    Page 3 of 3

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