Question $1(30$ marks$)$

A$.$ At the beginning of the year, the long$-$term debt of Company $x$ was $$3,500,000.$ At

the end of the year, long$-$term debt was $$3,200,000.$ The interest paid was $$255,000.$

What is the amount of the cash flow to creditors?

$(5$ marks$)$

B$.$ Company Y has the following balances on the balance sheet:

Net fixed assets

Current assets

Current liabilities

The financial results of the company in $2024$ are as follows:

Total sales is $$1,500,000$ with costs of $$905,000.$ Depreciation is $45,000$ and the tax

rate is $34$ percent. The company does not have any interest expense. The company

has paid $30\%$ of the net income to shareholders as dividend. In $2024,$ it has issued

and sold $$10,000$ worth of common stock.

i$)$ Calculate the operating cash flow.

ii$)$ Calculate the cash flow from asset.

iii$)$ Calculate the cash flow to stockholders.

iv$)$ Calculate the net capital spending

v$)$ Calculate the change in retained earning

$(5$ marks$)$

$(5$ marks$)$

$(5$ marks$)$

$(5$ marks$)$

$(5$ marks$)$

Question $2(20$ marks$)$

Use the following information for parts A and B$.$

Alimama Company would like to borrow $$8$ million for an investment project. Hang Seng

Bank is offering a loan of $$8$ million with $8\%$ p$.$a$.$ interest rate. The loan is to be repaid by

an equal payment at the end of each year for $6$ years.

A$.$ Calculate the annual amount Alimama Company will have to repay at the end of each

year.

$(6$ marks$)$

B$.$ ICBC is willing to lend the $$8$ million loan to Alimama Company with interest rate

of $7\mathrm{.}80\%$ p$.$a$.$ but the interest will be compounded every three months. Calculate the

EAR$\%$ offered by ICBC. Should Alimama Company borrow from ICBC instead of

Hang Seng Bank. Explain your answer.

$(4$ marks$)$

C$.$ Alimama Company is considering investment project $x.$ The present value of the cash

flows from investment project $x$ is $$10,499,034\mathrm{.}70$ when discounted at $8\%$ p$.$a$.$ The

company expects to receive $$3\mathrm{.}4$ million and $$4\mathrm{.}4$ million from the investment

project at the end of year $1$ and year $3$ respectively. Calculate the cash flow to be

received at the end of year $2.$

D$.$ Alimama Company is also considering another investment project Y$.$ The project can

generate a constant cash flow of $$300,000$ at the end of each year forever. The

Company's accountant calculated the present value of the cash flows from investment

project $Y$ to be $$3,750,000.$ Calculate the discount rate the accountant used in his

calculation.