Individual assignment
FIN2101 BUSINESS FINANCE
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FIN2101 BUSINESS FINANCE CONTINUOUS ASSESSMENT 1 INDIVIDUAL ASSIGNMENT: 30 marks (weightage 30%) Read the instructions in your course documents, in your student portal, Course Outline, CA outline and your Desire2learn (D2L) portal carefully. You will be penalized with marks deduction if the instructions are not strictly followed. Students are to upload their assignment by the due date through their student portal account. After the due date, students’ submissions will not be entertained. Students should keep a copy of assignment submitted. The submitted report must show evidence that this is students’ own work. Write your FULL Name AND your IC/Passport number as in the register on the answer script. Please be reminded that plagiarism and collusion are serious offences, and all cases will be referred to the administration. Grades will be withheld until investigations are completed if the submission is suspected of plagiarism or collusion. Deadline: 23 April 2021, 11.59am Penalty Marks for Late Submission of Assignment Within 24 hours: 20% to be deducted from total marks More than 24 hours: submission will be graded zero CA Submission CAs must be submitted online via student portal. Please read through instructions in your student portal, CA outline and D2L carefully before submitting. If you have further queries, please read the FAQ. If, after reading the FAQ, you need assistance on D2L submission, please contact the D2L team directly via email to itsd_simge@sim.edu.sg or call 6248 9393 Option 4. For non-D2L issues please email he10@sim.edu.sg. Please email with your student portal accounts. Email from other addresses will not be entertained. If issues raised are covered, you will be directed to read through instructions in the CA outline, D2L and the FAQ. Please take time to read thoroughly before raising issues.
FIN2101 BUSINESS FINANCE
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Question 1 Management may pursue job security, corporate luxury and higher remuneration at the expense of shareholders. (a) From the above statements, it is evident that an agency problem is present. Explain
what is an agency problem and why does it exist in businesses? (2 mark)
(b) Identify TWO (2) ways of minimizing agency problems. (2 marks)
Question 2
Given the following selected financial figures (in S$’000) for Asia Pac Manufacturing Ltd.
20X1 Sales Revenue 9,158 Cost of Sales 4,895 Gross Profit 4,263 Cash 537 Trade Receivables 866 Inventories 1,160 Total Current Assets 2,563 Trade Payables 542 Notes Payable 50 Accruals 281 Total Current Liabilities 873
From the above figures, compute and briefly explain the following: (Round all answers to two decimal places).
a) Current Ratio (2 marks)
b) Average Collection Period (2 marks)
c) Average Age of Inventory (2 marks)
d) Operating Cycle (2 marks)
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Question 3
DP Glass Ltd is evaluating investing in a project of $250,000 and is expected to generate Net Operating Profit after Tax (NOPAT) of $15,000. The firm’s weighted average cost of capital (WACC) is 8%.
(a) What is the Economic Value Added (EVA) of this project? (2 marks)
(b) Should the project be accepted? Explain your reason(s).
(2 marks)
Question 4
Discuss is meant by the phrase, “a firm is to consider the tradeoffs between risk and return in managing its NEGATIVE net working capital”?
(4 marks)
Question 5
JP Cake Corporation has forecasted its total funding requirements for the next year as shown in the following table.
Month
Total funding requirements ($)
Jan 100,000 Feb 60,000 Mar 60,000 Apr 60,000 May 80,000 Jun 40,000 Jul 30,000
Aug 70,000 Sep 60,000 Oct 50,000 Nov 90,000 Dec 80,000
(a) Given short-term funds cost 5% annually and long-term funds cost 8% annually, calculate the total financing cost for BOTH funding strategies below:
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• Aggressive funding strategy • Conservative funding strategy
(4 marks)
(b) Discuss TWO (2) risks involved in using the aggressive funding strategy. (2 marks)
Question 6
QZ Bath Ltd has a supplier that offer the following credit terms: 1/5 net 50.
(a) Calculate the cost of giving up the cash discount for the suppliers. Give your answer in percentage terms (to 2 decimal places).
(2 marks) (b) Given the firm’s cost of borrowing from the bank is 12%. Should the firm take the discount from any of the suppliers? Explain your reason(s). (2 marks)
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