Question $2-$ Time Value of Money and DCF Techniques

$10$ Marks

A$.$ Peter deposits K $1000$ annually in a bank for $5$ years. This deposits cam a compound interest of $10$ percent. What will be the value of this series of deposits at the end of $5$ ycars? $(4$ Marks$)$

B$.$ John wishes to determine the present value of the following cash flows discounted at $10\%$

$\backslash$table$[[$Year$,1,2,3,4,5],[$Cash Flow,K $500,$K $1000,$K $1500,$K $2000,$K $2500]]$

C$.$ Find out how much does a deposit of $K5000$ grow to at the end of $6$ years, if the normal rate of interest is $12\%$ and the frequency of compounding is $4$ times a year? $(3$ Marks$)$

Question $3$ Working Capital Management

$10$ Marks

Cost Sheet of a company provides the following particulars. Raw Materials $40\%$; Labour $10\%$; Overheads $30\%.$

The following details are also available.

a$)$ Raw Materials remain in stores for $6$ weeks

b$)$ Processing time $-4$ weeks

c$)$ Finished goods are in stock for $5$ weeks

d$)$ Period of credit allowed to debtors $10$ weeks

e$)$ Lag in payment of wages $2$ weeks

f$)$ Period of credit allowed by creditors $4$ weeks

g$)$ Selling price K $50$ per unit

h$)$ Production in unit $13,000$ per annum

sin

Add $10\%$ for contingencies. Required to: prepare a statement of working capital requirements.

Question $4$ Cash Management and Valuation of Shares

$10$ Marks

$($A$)$ Sun Ltd$.$ provides the following information about its liquidity.

Annual yield on marketable securities is $9\%$

The fixed cost of effecting a marketable securities transaction is $K20$

The standard deviation of the change in daily cash balance is $K2500$