3. The following information shows the Statement of Financial Position and the Income Statements for Green Living Bhd.

Statement of Financial Position as at 31 December 2019 RM000

RM000 5 000 2 000 3 000 10 000 5 000 7 000 10 000 32 000

Cash Receivables Inventories Total current assets

Fixed assets Total assets

2 000 5 000 9 000

16 000

16 000 32 000

Accounts payable Notes payable Accrued liabilities Total current liabilities Long-term debt Common stock Retained earnings Total liabilities and equities

Income Statement for the year ended 31 December 2019

Sales Operating costs Earnings before interest and tax Interest Earnings before tax Taxes (23%) Net Income Dividends (10%) Addition to retained earnings

RM000 120 000 60 000 60 000 10 000 50 000 11 500 38 500 3 850 34 650

Assume that in 2020, sales are expected to increase by 30% over 2019 sales. Furthermore, assume that the company was operating at full capacity in 2019 and it cannot sell off any of its assets. In addition, assume that any required financing will be borrowed as notes payables and long-term debt. Finally, assume that its assets, spontaneous liabilities and operating costs will increase at the same percentage as sales.

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(a) Use the additional financing needed (AFN) equation to forecast the additional funds that the company will need in 2020. What happen to the AFN if the company decrease the dividend pay-out instead of increase it?

(8 marks)

(b) Calculate the AFN using pro-forma financial statements. Does using this method will yield different amount of AFN from equation method? Why is this situation happened?

(14 marks)

(c) The company will raise the AFN in (b) from notes payable (30%) and long- term debt (70%). Based on this information, calculate the amount of AFN required in terms of notes payable and long-term debt.

(3 marks)

4. You would like to have RM50 000 in 10 years. To accumulate this amount, you have to deposit each year an equal sum in the bank, which will earn 4% interest compounded annually. Your first payment will be made at the end of the year.

1. (a) How much must you deposit annually to accumulate this amount? (2 marks)

2. (b) If you decide to make lump-sum deposit today instead of annual deposits, how large this lump-sum deposits should be?(Assume you can earn 4% semi- annually on this deposits)

   (6 marks)

3. (c) At the end of 4 years you will receive RM10 000 and deposits this in bank towards yours goal of RM50 000 at the end of 10 years. In addition to this

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deposit, how much must you deposit in equal annual deposit to reach your goal? (Again assume that you earn 4% on this deposit.)

(8 marks)

(d) Discuss the concept of compounding and discounting in time value of money and how they will affect your investment decision.