Page $1$ of $7$UNIVERSITY OF ESWATINIDEPARTMENT OF ACCOUNTING AND FINANCEINDIVIDUAL ASSIGNMENTACADEMIC YEAR $2023/2024$PROGRAMME OF STUDY : Master of Business AdministrationYEAR OF STUDY : Year $1($Part Time$)$TITLE OF THE PAPER : Corporate Finance and InvestmentCOURSE CODE : ACF $603$DUE : $9$th March $2024$INSTRUCTIONS$1.$ There are TWO $(2)$ questions; ANSWER ALL THE QUESTIONS$\mathrm{.}2.$ The paper consists of seven $(7)$ numbered pages, including this page and Appendix $1$which contains useful formulae$\mathrm{.}3.$ Begin the solution to each question on a new page$\mathrm{.}4.$ The marks awarded for a question are indicated at the end of each question$\mathrm{.}5.$ Show ALL your necessary workings.NOTE: You are reminded that in assessing your work, account will be taken of accuracy of the languageand the general quality of expression, together with layout and presentation of your answer.SPECIAL REQUIREMENT: SCIENTIFIC $/$ FINANCIAL CALCULATORPage $2$ of $7$ANSWER ALL THE QUESTIONS $(50$ Marks$)$QUESTION ONE $(25$ Marks$)1\mathrm{.}1$ Susana wants to buy a car that costs $$12,000.$ She has arranged to borrow the total purchaseprice of the car from her credit union at a simple interest rate equal to $12$ percent. The loanrequires quarterly payments for a period of three years. If the first payment is due in threemonths $($one quarter$)$ after purchasing the car.$($a$)$ What will be the amount of Susanas quarterly payments on the loan? $(4$ Marks$)1\mathrm{.}2$ Sinethemba invested $$300000\mathrm{.}00,18$ months ago. Currently, the investment is worth $$337850\mathrm{.}00,$ Sinethemba knows the investment has paid interest every three months $($i$.$e$.$quarterly$),$ but he doesnt know what the yield on her investment is$.$ Help Sinethemba.$($a$)$ Compute both the annual percentage rate $($APR$),$ rSIMPLE. $(3$ Marks$)($b$)$ Compute effective annual rate $($EAR$)$ of interest, rEAR. $(4$ Marks$)1\mathrm{.}3$ Assume that your aunt sold her house on January $1$ and that she took a mortgage in theamount of $$10,000$ as part of the payment. The mortgage has a quoted $($or simple$)$ interestrate of $10$ percent, but it calls for payments every six months, beginning on June $30,$ and themortgage is to be amortized over $10$ years. Now, one year later, your aunt must file a Form$1099$ with the IRS and with the person who bought the house, informing them of the interestthat was included in the two payments made during the year. $($This interest will be income toyour aunt and a deduction to the buyer of the house.$)($a$)$ To the closest dollar, what is the total amount of interest that was paid during the firstyear? $(6$ Marks$)1\mathrm{.}4$ Wandile just graduated from college. Unfortunately, Wandiles education was fairly costly;the student loans that he took out to pay for his education total $$95,000.$ The provisions of thestudent loans require Wandile to pay interest equal to the prime rate, which is $8$ percent, plusa $1$ percent margin that is$,$ the interest rate on the loans is $9$ percent. Payments will be madePage $3$ of $7$monthly, and the loans must be repaid within $20$ years. Wandile wants to determine how he isgoing to repay his student loans.a$.$ If Wandile decides to repay the loans over the maximum period that is$,20$ years howmuch must he pay each month? $(4$ Marks$)$c$.$ If Wandile pays $$985$ per month, how long will it take him to repay the loans? $(4$ Marks$)$QUESTION TWO $(25$ Marks$)2\mathrm{.}1$ Midnight Magic Companys stock is currently selling for $$19\mathrm{.}50$ per share. At the end ofthe year, the company plans to pay a dividend equal to $$2\mathrm{.}34$ per share. For the remainderof the companys life, dividends are expected to grow at a constant rate, and investors areexpected to require a $16\%$ return to invest in Midnight Magics stock. What is the valueof Midnight Magics stock five years from now? $(6$ Marks$)2\mathrm{.}2$ Since it has been in business, FoolsGold Jewellery has never paid a dividend. Thecompany will not pay a dividend at the end of this year. However, two years from today $-$at the end of Year $2-$ FoolsGold expects to pay a dividend equal to $$0\mathrm{.}50$ per share,which it plans to increase by $6$ percent each year thereafter for the remainder of thecompanys life. If investors require a $14\%$ rate of return to purchase its common stock,what should be the market value of FoolsGolds stock today? $(4$ Marks$)2\mathrm{.}3$ Blue Ocean $($BO$),$ Eswatini Limited recently paid a E$2\mathrm{.}00$ per share dividend, which isexpected to grow at a constant rate forever. BOs stock, which has a beta coefficientequal to $1\mathrm{.}1,$ is selling for E$37\mathrm{.}50$ per share. Currently, the risk$-$free rate of return is $4$percent and the return on an average stock is $10\%.$ If BOs stock is selling at itsequilibrium price, what is its growth rate? $(4$ Marks$)2\mathrm{.}4$ Denzel Limited is a company listed on the Eswatini Stock Exchange $($ESE$)$ in Eswatini.The company is considering an investment in new plant and equipment at a cost of E$36$million. The company will pay a deposit of E$6$ million. The bank has offered the firm aloan of E$30$ million, repayable in equal annual instalments over $5$ years at an interest of$9\%.$ The economic life of the project is $5$ years and the company expects to achieve aresidual value E$12$ million on the sale of the equipment at the end of $5$ years.Alternatively, the bank is also prepared to offer a loan of E$30$ million, repayable in equalPage $4$ of $7$annual instalments except for a bullet or ballon payment at the end of $5$ years, equal toE$12$ million, which the company will pay from the proceeds on a sale of the equipment.The interest rate is also $9\%$ on this loan.$($a$)$ Set up an amortization schedule for the loan under the two $(2)$ alternatives. $(9$ Marks$)($b$)$What is the total interest paid under each of the alternatives? $(2$ Marks$)$Page $5$ of $7$ASSIGNMENT GUIDELINES$1.$ Your Assignment should include a Cover Page with all your full details and a Tableof Contents page$\mathrm{.}2.$ Text: Font: Arial or Times New Roman $(12),$ Spacing: $1\mathrm{.}5$ lines$\mathrm{.}3.$ All text must be justified at each margin$\mathrm{.}4.$ Show all your relevant calculations $/$ workings$\mathrm{.}5.$ Cohesive and logical arguments reflecting original thinking is encouraged. Theassignment should also have headings to highlight key fundamentals issues incorporate finance and investment$\mathrm{.}6.$ References At least $10$ academic sources of reference must be used $($These includetextbooks, journal articles and internet sources that are relevant to the field of study$\mathrm{.}7.$ Reference list must be provided at the end of your assignment$\mathrm{.}8.$ The APA Referencing System must be used$\mathrm{.}9.$ It is imperative that students proof read and edit their assignment prior to submittingthem$\mathrm{.}10.$ Assignment must be free from errors and of professional standard$\mathrm{.}11.$ Assignment must be submitted in hard copy before and $/$ or on the due date.Page $6$ of $7$APPENDIX $1-$ FORMULAE SHEETQuick Ratio $=($Current Assets $-$ Inventory$)/$ Current LiabilitiesROA $=$ NP AT $/$ Total AssetsCurrent Ratio $=$ Current Assets $/$ Current LiabilitiesEquity Multiplier $=$ Total Assets $/$ EquityInventory Turnover $=$ Cost of Goods Sold $/$ InventoryTimes Interest Earned $=$ PBIT $/$ Interest paidNet Profit Margin $=$ NPAT $/$ SalesPIE ratio $=$ Market price per share $/$ EPSTotal Debt ratio $=$ Total debt $/$ Total AssetsROE $=$ NP AT $/$ EquityAccounts receivable Period $=$ Accounts Receivables $/$ Sales x $360$ daysInventory period $=$ Inventory $/$ COGS x $360$ daysDebt: Equity ratio $=$ Total Debt $/$ Total EquityTotal Asset Turnover $=$ Sales $/$ Total AssetsCash ratio $=$ Cash $/$ Current LiabilitiesROE $=$ PMx TATxEMFV of a lump sum $=$ PV x $(1+$ r$)$t PV of a lump sum $=$ FV $/(1+$ r$)$tPVAn $=$ PMT x $[1-1/(1+$ r$)$n$]$rPage $7$ of $7$ gPg$1$DR$00$E RP $=$ DP$0$ FMEFE RRxRR Bond value $=$ C x $[11/(1+$ r$)$t $]+$ F $/(1+$ r$)$tr WACC $=$ cDPE T$1$xRxVDRxVPRxVE $)1(/$ TcEDRRRR DUUE $=+()/(+2)/3$ gPDRE $01$ g $=$ ROE x b $)]([$ lhxHLVLlrB P$0=$ D$1/($r g$)$ Pt $=$ Dt$+1/($R g$)$ P$0=$ DRPEND OF PAPERDDCUCL RDRTRTPBITV $)1($UCU RTPBITV $)1($