You are considering two options of scholarship to fund your degree program for the next three years.
Question:
You are considering two options of scholarship to fund your degree program for the next three years. There are two scholarship offers that you are eligible to apply for. Each of the scholarship offers you a different payment arrangement. Assume a discount rate of 8.5%, compute the present value for each option and determine the best option for you. The payment arrangements are stated below:
Scholarship A: A lump sum payment of $55,000 will be paid after three years upon the completion of your degree program.
Scholarship B: A lump sum payment of $30,000 in the second year of your study.
QUESTION 3
The following data is presented to facilitate an analysis of the two companies, A and B.
Ratio | Company A | Company B |
Current ratio | 0.8 | 1.1 |
Total assets turnover ratio | 1.8 | 1.98 |
Debt ratio | 0.45 | 0.55 |
Times-interest-earned ratio | 3.5 | 4.0 |
Return on total equity | 3.5% | 4.29% |
Return on total assets | 1.5% | 2.13% |
Compare the financial ratios of Company A and Company B given above, and interpret the companies' performance for each of the ratio.
QUESTION 4
KK Co wants to borrow $15,000 for a period of 300 days. Total interest value payable to the bank is $550. Calculate the effective interest rate on this borrowing.
QUESTION 5
a) Calculate the cost of credit for the following loans:
- Bank A: Amount borrowed is $20,000 for a period of 120 days. Interest rate charged is 4% p.a.
- Bank B: Amount borrowed is $20,000 for a period of 300 days. Interest rate charged is 5% p.a.
b) If Ging Co. sets maximum cost of credit at $500, determine which loan should be accepted by the company. Justify.
QUESTION 6
QUESTION 7
Explain the TWO roles played by financial management in a company.
QUESTION 8
State TWOgoals of a company and provide three points for each goal.
QUESTION 9
List down TWO characteristics of a common stock.
QUESTION 10
Explain the FIVE basic items in a bond agreement.
Principles Of Managerial Finance
ISBN: 978-0136119463
13th Edition
Authors: Lawrence J. Gitman, Chad J. Zutter