Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Financial Management Expert

problem1)

1.1) Suppose you own 100 ‘Randfirst’ shares (a company listed on the Johannesburg Stock Exchange) which you intend to sell today. Since you will sell those shares in the secondary market, Randfirst will receive no direct cash flows as a consequence of your sale. Why should Randfirst’s management care about the price you get for your shares?

1.2) describe why the income statement is not a good representation of cash flow.

The following information should be used for problems 1.3, 1.4 and 1.5.

Market Marketers LTD                          2011  (R)                          2012 (R)
Sales                                                       740                                 785
Cost of goods sold                                   430                                 460
Interest expense                                        33                                   35
Dividends                                                   16                                   17
Depreciation                                             250                                 210
Cash                                                          70                                   75
Accounts receivables                                 563                                 502
Current liabilities                                        390                                 405
Inventory                                                 662                                 640
Long-term debt                                        340                                 410
Net non-current assets                          1 680                               1 413
Ordinary share capital                              700                                  235
Additional Information: Tax rate 28%

REQUIRED:

1.3) What is the change in net working capital from 2011 to 2012?

1.4 )What is the operating cash flow for 2012?

1.5) Why is interest expense excluded from the operating cash flow calculation?

problem2) To answer the following problems (2.1-2.7) it would be in your best interest to have mastered and to make use of a financial calculator. Where applicable, indicate in your answer book the key strokes (shown below) used in arriving at your answer:

N (number of periods); I(interest rate); PV(Present value); PMT (Payment); FV (Future value) Show all workings and round off your answers to the nearest whole cent(two decimal places) where necessary.

2.1) Susan invests R2 500 in a money market account every quarter and will withdraw the lump sum in 5 years’ time. If the account earns interest at 6% compounding quarterly, how much will her lump sum be in 5 years if she makes her first payment 3 months from now.

2.2) Briefly describe why present values decrease as the discount rate increases

2.3) Beatrice invests R1 000 in an account that pays 4% simple interest. How much more could she have earned over a five-year period if the interest had compounded annually?

2.4) Your grandmother invested one lump sum 17 years ago at 4, 25% interest compounding per annum . Today, she gave you the proceeds from that investment which totalled R5539, 92.
How much did your grandmother originally invest?

2.5) Forty years ago, your father invested R2 500. Today that investment is worth R107 921. What is the average rate of return your father earned on his investment?

2.6) An investment is made of R 3000 per quarter for 6 years at an annual interest rate of 8%, compounded quarterly.
Assuming each investment is made at the end of each quarter, what will be the accumulated value of these investments by the end of year 6?

2.7) You market antique matchboxes. One particular box increases in value at a rate of 5% compounding per year. Today, the matchbox is worth R29,50. How much additional money can you make if you wait ten years to sell it rather than selling it five years from now?

2.8) You are told that the effective interest rate is 10% p.a. and compounding occurs quarterly. What is the nominal interest rate?

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M93105

Have any Question? 


Related Questions in Financial Management

A stock had a return of 81 percent last year if the

A stock had a return of 8.1 percent last year. If the inflation rate was 1.9 percent, what was the approximate real return? Enter your answer as a percent rounded to 1 decimal place. Omit the "%" sign in your response.) ...

Peter is considering a project with an initial cost of

Peter is considering a project with an initial cost of $42,000 and annual cash inflows of $9,100 a year for six years. What discount rate, when applied to this project, will produce a profitability index of 1.0? Please e ...

Jose is 25 years old today and has a retirement plan that

Jose is 25 years old today and has a retirement plan that permits him to place monthly amounts of $150 into a retirement vehicle, beginning one month from now, for 30 consecutive years. When Jose reaches retirement at ag ...

Standards life insurance offers a perpetuity that pays

Standards Life Insurance offers a perpetuity that pays annual payments of $12,000. This contract sells for $250,000 today. What is the interest rate? 4.80 percent 3.87 percent 4.10 percent 4.21 percent 4.39 percent

A new restaurant is ready to open for business it is

A new restaurant is ready to open for business. It is estimated that the food cost (variable cost) will be 40% of sales, while fixed cost will be $450,000. The first year's sales estimates are $1,250,000. The cost to sta ...

6 years ago blue lake corp issued 30 years to maturity zero

6 years ago Blue lake Corp. issued 30 years to maturity zero coupon bonds with a par value of $5,000. the current interest rate on this type of bond is 10.71 percent compounded annually. What is the current price of the ...

Beverley hills banking has been growing by leaps-n-bounds

Beverley Hills Banking has been growing by leaps-n-bounds due to its superior customer service and personal knowledge of local markets and clients. As such, its dividend is expected to grow by 20% over the next 2 years, ...

Investment banksa list the five main activities that

Investment banks: a. list the five main activities that investment banks engage in. b. what were the two main activities that investment banks were involved in prior to the 80s? c. which two activites have gained promine ...

What does it mean if a company has a capital spending - 5

What does it mean if a company has a Capital Spending - 5 yr growth rate ratio of 24.22 while the industry and sector ratios are 12.72 and 9.18? How are they performing against the industry and sector? Why are they perfo ...

Gary kornig will be 30 years old next year and wants to

Gary Kornig will be 30 years old next year and wants to retire when he is 65. So far he has saved (1) $6,800 in an IRA account in which his money is earning 8.3 percent annually and (2) $5,990 in a money market account i ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen