1. What is meant by working capital? Describe the working capital cycle and the cash conversion cycle. (1+4 marks) 2. Answer the following 2 questions: a) A zero coupon bond with a par value of OMR 100 matures in six years. What is the price of the bond if the yield to maturity is 6 per cent? (2 marks) b) The risk free return is 9 percent. Company T has a beta of 1.5 and an expected return of 25 percent. Calculate the risk premium for the market index over the risk free rate assuming T is on the security market line. (3 marks) Section B Questions - Answer by THREE 3. The initial cash outflow is OMR 150,000. The discount rate is 10% Year Year 2 Cash flow Probability Cash flow Probability 100,000 50,000 0.6 150,000 04 Calculate Expected NPV and Standard Deviation of NPV. (2+3 marks) 4. What are the objectives of a firm? Discuss any five in detail 5. Gulf construction has two possible projects to consider. It cannot do both they are mutually exclusive. The annual cash flows in OMR are: Point in time Sur project Saham project 0 2 200.000 120.000 120.000 155.000 155.000 155.000 155.000 Gulf construction's cost of capital is 12 percent. Assume unlimited funds and these are the only cash flows associated with the projects. Calculate IRR for each project (2.5 marks each) For IRR calculation use 17 per cent and 18 per cent for Sur project For IRR calculation use 13 per cent and 14 per cent for Saham project 6. Answer the following 2 questions a) What will an OMR 150 investment be worth in three years time if the rate of interest is 9 per cent, using : Simple interest and (ii) Annual compound interest? (2.5 marks) b) The Fresh and Green will maintain your garden plot forever for a payment of OMR 125 now, followed by annual payments in perpetuity of OMR 100. How much would you have to put into an account which was to make these payments if the account guaranteed an interest rate of 8 percent? (2.5 marks)