Question five

$($a$)$ Differentiate between independent and mutually exclusive investment projects.

$(4$ marks$)$

$($b$)$ A company is considering two mutually exclusive projects $-$R and S $-$ with the following cash flow projections.

$\backslash$table$[[$Time$,$Cash flows $($million TShs$)],[,$Project R$,$Project S$],[0,-840,-840],[1,700,70],[2,350,420],[3,70,760]]$

$($i$)$ Compute each project's net present value $($NPV$)$ if shareholders in the company accept a $9$ per cent rate of return from similar investment projects. $(6$ marks$)$

$($ii$)$ Compute each project's internal rate of return $($IRR$).$

$(6$marks$)$

$($iii$)$ Which of the two projects would you recommend to the company's management?

$(2$ marks$)$

$($iv$)$ Would your recommendation change if the two projects were independent of each other? Why?

$(2$marks$)$

Question six

$($a$)$ State Modigliani and Miller's proposition I $($MMI$)$ of capital structure decision in the absence of taxes. How would their proposition change in the presence of corporate taxes?

$(10$ marks$)$

$($b$)$ What does the trade$-$off theory say about the corporations' debt financing position? Explain how the theory modifies the position of Modigliani and Miller with corporate taxes in part $($a$)(10$ marks$)$

Question seven

a$)$ Explain the Scope of financial management for a corporation $(6$ Marks$)$

b$)$ As a finance manager of a mid$-$sized firm, explain the external factors which need to be evaluated for their impact on business and financial strategies. $(6$ Marks$)$

c$)$ What are some of the drawbacks of profit maximization objective of financial management in most organizations in Tanzania

$(8$ Marks$)$