1. A project has an annual net cash inflow (in current terms) of $ 3 million, occuring at the end of each year of the projects two-year life. An investment of $3.5 million is made at the outset. All cash inflows are subject to corporation tax of 30%, payable when the cash is received. There is no tax-allowable depreciation on the initial investment. An average inflation rate of 5% per annum is expected to affect the inflows of the project.

The cost of capital in money terms is 15.5%

What is the expected net present value (NPV) of the project (you must use Excel fx to calculate NPV!)?

a. $93,668

b. $125,219

c. $144,628

d. $367,448

2. You have calculated the following NPVs relating to two mutually-exclusive projects, A and N.

The companys cost of capital is 10%

Project	A	N
NPV 10%	100	35
NPV/$ Invested	50	24

If your objective is the maximisation of shareholder wealth, which project(s), if any, should you accept?

a. Neither project

b. Project A only

c. Project N only

d. Both projects

3. Omega Plc usually takes 2 months to collect its debts from credit customers. It has just issued an invoice to Gamma Plc for 100 and offers a cash discount of 2% if payment is made within 1 month.

What is the effective annualised cost of the discount if Gamma Plc does settle within 1 month?

a. 27.4%

b. 34.4%

c. 20.0%

d. 32.6%

4. An Iraqi company is expecting to receive Indian rupees in one years time. The spot rate is 19.68 Iraqi dinar per 1 India rupee. The company could borrow in rupees at 10% or in dinars at 15%.

What is the expected exchange rate in one years period?

a. 18.82 Iraqi dinar = 1 Indian rupee

b. 20.58 Iraqi dinar = 1 Indian rupee

c. 21.65 Iraqi dinar = 1 Indian rupee

d. 22.63 Iraqi dinar = 1 Indian rupee

5. Retro Plc is a retailer of large storage boxes. The company has an annual demand of 120,000 units. The costs incurred each time an order is placed are $200. The carrying cost per unit of the item each month is estimated at $3. The purchase price of each unit is $4. The economic order quantity formula is:

EOQ = (2 x C0 x D) / CH

When using this formula to find the optimal quantity to be ordered, which of the following amounts are not included in the calculation?

a. Cost per order ($200)

b. Carrying cost per unit ($3)

c. Purchase price per unit ($4)

d. Estimated usage of the inventory item over a particular period (120,000 units per annum)

6. A company has a number of projects available to it but has a limit of 20,000 on its capital investment funds. Each project has an initial outlay followed by a constant annual cash inflow in perpetuity, commencing in one years time. The projects are as follows.

Project	Initial Outlay	Inflow per Year
EE	6,000	900
FF	8,000	1,000
GG	10,000	3,500
HH	12,000	3,600
II	20,000	4,600

The companys cost of capital is 10% per year and all projects are independent and indivisible.

What is the maximum net present value (NPV) that can be generated?

a. 26,000

b. 27,000

c. 28,000

d. 45,000

7. Roger Plcs projected revenue for 2022 is 350,000 . It is forecast that 12% of sales will occur in January and remaining sales will be equally spread among other eleven months. All sales are on credit. Receivables accounts are settled 50% in the month of sale, 45% in the following month, and 5% are written off as bad debts after two months.

Which of the following amounts represents the budgeted cash collections for March?

a. 24,500

b. 26,600

c. 28,000

d. 32,900

8. A company is currently evaluating a project which requires investments of 12,000 now, and 4,800 at the end of year 1. The cash inflow from the project will be 16,800 at the end of year 2 and 14,400 at the end of year 3. The cost of capital is 15%.

What is the discounted payback period and the net present value (NPV) for this project? Use PV-FV Interest Factor Table for finding discount factor and NPV calculation!

a. DPP 2.0 years; NPV 6,000

b. DPP 2.4 years; NPV 4,400

c. DPP 2.0 years; NPV 4,400

d. DPP 2.4 years; NPV 6,000

9. Alfa Plc has announced a 1 for 5 rights issue at a subscription price of 2.30 . The current cum-rights price of the shares is 3.35 .

What is the new ex-div market value of the shares?

a. 3.18

b. 3.81

c. 2.97

d. 2.48

10. Omega Plc manufactures plastic furniture. The company buys raw material from suppliers that allow the company 2.5 months credit. The raw materials remain in inventory for 2 months and it takes Omega Plc 2 months to produce the goods, which are sold immediately production is completed. Customers take an average of 1.5 months to pay.

What is Omega Plcs cash operating cycle?

a. 2 months

b. 2.5 months

c. 3 months

d. 7 months