(15 marks) * and arks) strategic thinking in the shaping of the competitive advantage (15 marks) intage hones. as in the local market. The demand for phone is 600,000 phones -nhone in stock for one year. The financial man Question 3 (a) A company order and sell phones in the local market. The demand for phone is 600,000 phones per annum. It was estimated that it cost GHS3 to keep one phone in stock for one year. The financial manager estimated that it will cost GHS40 each time an order is to be placed for new phones. Required: () Calculate the optimum quantity that should be ordered each time an order is placed (3 marks) (ii) Calculate the total inventory cost per annum for the company (2 marks) (iii) How many order would be placed in a year. (1 mark) e (b) Metal Ltd has current sales of GHS150 million a year. Cost of sales 75% of sales and bad debt are one percent of sales. Cost of sales comprises 80% variable cost and 20% fixed costs, while the company's required rate of returns is 12%. The company currently allows customers 30 days credit, but is considering increasing this to 60 days credit in order to increase sales. It has been estimated that this change in policy will increase sales by 15% whiles bad debt will increase from one percent to four per cent. It is not expected that the policy change will result in an increase in fixed cost. Payables and inventory will unchanged. Required Advise Metal Ltd on the introduction of this proposed policy (9 marks) (Total 15 marks) Question 4 (a) With the aid of a suitable diagram, describe the view of the traditional theory of capital structure. (5 marks) (b) The management of Loco Ltd is trying to decide on the cost of capital to apply to the evaluation of investment projects. The company has issued a equity share capital of 500,000 at GHST each, with current market value cum div of GHS1.17 per share. It has also issued GHS200,000 of 10% debentures, which are redeemable at par in two years time and have a current market value of GHS105.3 per stock, and GHS100,000 of 6% preference shares, currently quoted at GHS0.40 per share. The preference dividend has just been paid, and the ordinary dividend and debenture interest are due to be paid in the near future, The ordinary share dividend will be GHS60,000 this year, and the directors have published their view that earnings and dividends will increase by 5% a year into the indefinite future. The company pays tax at 30% Required Estimate the company's weighted average cost of capital. (10 marks) (Total 15 marks)