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Brief Answer Questions:
[6 × 1 = 6]What do you mean by strategic plan?
What is the risk-free rate?
How does operating BEP differ from cash BEP?
What is systematic risk? Give an example.
Define the term 'ordering cost'.
What is the annual percentage cost of non-free trade credit of 2/20, net 50?
Descriptive Answer Questions:
[6 × 3 = 18]What is an efficient portfolio? Explain with an example.
Difference between financial risk and operating risk.
What is stock dividend? How is it differ from stock split?
ABC company has Rs 5 million in sales and Rs 1.7 million in fixed assets. Currently, the company's fixed assets are operating at 90 percent of capacity.
a. What is the company's full capacity sales?
b. What is the company's target fixed asset-to-sales ratio?
Jumla apple drink manufacturer shareholders' equity, December 30, 2022 are as follows:
| Common stock (40,000 shares @ Rs 100) | Rs 4,000,000 |
| Additional paid in capital | Rs 1,000,000 |
| Retained earnings | Rs 5,000,000 |
| Total shareholders' equity | Rs 10,000,000 |
On December 31, firm declare a 20 percent dividend. The price of the stock on December 30 was Rs 600. Reformulate the shareholders' capitalization account of the firm.
Kathmandu biscuits factory has 6 times inventory turnover, 70 days receivables collection period, and 40 days payable deferral period.
a. What is the firm's cash conversion cycle?
b. If the firm's annual sales are Rs 5 million and 80 percent of sales are on credit, what is the firm's investment in accounts receivable?
Problem Solving Questions:
[4 × 6 = 24]The most recent balance sheet of Karki furnishing (Pvt.) ltd is given below:
Balance Sheet as of December 31, 2021 balance sheet (in million Rs)
| Cash | Rs 100 | Account payable | Rs 100 |
| Account receivable | 300 | Notes payable | 50 |
| Inventory | 300 | Accruals | 50 |
| Net fixed assets | 500 | Long term debt | 400 |
| Common stock | 300 | ||
| Retained earnings | 300 | ||
| Total assets | 1,200 | Total liabilities and equities | 1,200 |
Sales are forecasted to increase from Rs 2,000 million in 2021 to Rs 3,000 million in 2022. The firm's fixed assets were used at full of capacity during 2021, but its current assets were at their proper levels. The Firm's after-tax profit margin is forecasted to be 10 percent, and its payout ratio will be 60 percent.
a. What is the firm's additional funds needed (AFN) for the year 2022
b. Prepare Pro forma balance sheet for the firm for the year 2022.
Consider the rate of return associated with stock J and NEPSE return given in the following:
| years | NEPSE return | Return on stock J |
| 2018 | 15% | 20% |
| 2019 | 10 | 15 |
| 2020 | -5 | 5 |
| 2021 | 20 | 20 |
| 2022 | 10 | 20 |
a. Calculate the mean and standard deviation of stock J and market.
b. Beta coefficient of stock J.
c. If risk-free rate is 6 percent, what is required rate of return on stock J?
Kathmandu toy manufacturing company expected to break even on an accounting basis in its third year. Sales for the third year are projected at 10,000 units. The selling price of the toy is Rs 30 and the variable is Rs 18 each. Installed fixed assets including plant and machinery, furniture, and fixtures amount Rs 80,000, which are depreciated straight-line basis in five years. What will be fixed costs without depreciation? What is its cash break-even point in units?
Nanglo bread company requires 100,000 bags of wheat per year for the production of bread. Each bag contains 50 kg of wheat and the purchase price per kg is Rs 25. It costs 10 percent for holding the inventory of wheat in stock per year and ordering costs per order is Rs 500. The firms require 9 days to receive the order placed and require maintain in 10 days for consumption in safety stock.
a. What is the EOQ of wheat in kg?
b. What is the total inventory cost of wheat including safety stock?
c. What is re-order level?
Comprehensive Answer Questions:
[1 × 12 = 12]City Bank Limited is planning to install an intercom communication system. The price of inter come machine is Rs 550,000. In addition to this, it will have to spend Rs 20,000 to carry the machine from the dealer, modification cost is Rs 15,000 and, installation cost is Rs 5,000. The present receptionist is drawing Rs 30,000 monthly salaries. The same receptionist will handle the intercom service. The company has estimated that this machine will run for 5 years to come. The company can control outgoing calls and long-distant calls through this system. So, it can save Rs 150,000 each year. Straight line method of depreciation is used. The expected salvage value is Rs 40,000. However, the machine can be sold for Rs 60,000 at the end of the fifth year and company's tax rate is 20 percent.
Required
a. What will be the initial investment of City Bank Ltd.?
b. What will be the depreciation each year?
c. What will be the annual operating cash saving?
d. What will be the terminal cash flow of the machine?
e. Should the City Bank Install the system? Discounting rate is 10 percent.