7:01 Back FIN420 JULY 2022-... Hak Cipta Universiti Teknologi MARA CONFIDENTIAL a) Optimal Economics Order Quantity (EOQ) b) Company's total inventory costs for the year 2022 c) Reorder point QUESTION 1 Raya Enterprise is a biscuit manufacturer that specialises in oranges biscuits. Every year, the company uses 20,000 boxes of oranges at a cost of RM40.00 per box. The oranges carrying cost is 20 percent of the selling price, while the ordering cost is expected to be RM140.00 per order. Furthermore, Raya Enterprise has decided to keep a safety stock of 1,500 boxes of oranges, with delivery taking 14 days. The order should be placed in 100 units, with the assumption that a year has 360 days. Compute the following: CONFIDENTIAL BA/JUL 2022/FIN420 (#2) QUESTION 2 MSK Berhad faces a cash shortage of RM650,000. It plans to take up a short-term financing for three months. The following sources of fund are available: (3 marks) (5 marks) (2 marks) Alternative I A discounted loan with 8% interest rate. The bank requires a 12% compensating balance on the borrowed amount. The firm normally maintains a RM35,000 balance in its current account. a) Calculate the effective interest rate for each alternative. b) Which alternative would you recommend to MSK? Why? Alternative Il Issuing commercial paper which mature in 90 days with a face value of RM130,000 each. The commercial paper has a placement fee of RM1000 per paper and the stated interest rate is 12% per annum Hak Cipta Universiti Teknologi MARA Alternative Ill A revolving credit line with AC Bank which offers a maximum amount of RM1,000,000 with a quoted interest rate of 6%. Any unused fund is subject to 2% commitment fee. No other condition is imposed (9 marks) (1 mark) CONFIDENTIAL 7:01 Back FIN420 JULY 2022-... Hak Cipta Universiti Teknologi MARA CONFIDENTIAL QUESTION 3 Almas Utara Sdn. Bhd. needs RM5 million to open a new production factory in Kulim, Kedah. Based on investigation, there are three alternatives available to the company to reach the target financing. First, the company can issue a 12 year's bond, 12 % bond selling at price RM1080. The floatation cost is 5% of the par value and current tax of the company is 30% Second, the company has the option to issue preferred shares that pay 10% dividend on par value. The current price of the company's shares is RM140 and the cost of issuing these shares is estimated at 8% of its current price. Third, the company can consider to offer common stock at the selling price of RM65 per share. The growth rate is constant which is 6 % and is expected to pay a dividend of RM4. The floatation cost would be 5% of the selling price. i) Calculate the cost of financing for each alternative. (9 marks) i) Which alternative would you recommend to Almas Utara Sdn. Bhd. Please justify your answer. (1 marks) QUESTION 4 Maxpro Berhad is evaluating two independent projects to invest in 2023. The projects might have good potentials with the following details: Initial Outlay Cash Inflows YEAR) 1 Ww. V. 2 3 4 5 PROJECT F 400,000 100,000 120,000 120,000 230,000 120,000 Hak Cipta Universiti Teknologi MARA Net Present Value IRR for Project G Profitability Index Which project to invest and why? PROJECT G 400.000 CONFIDENTIAL 150.000 150,000 150,000 The required rate of return for the company is 12 percent. As a financial manager of Maxpro Berhad, you are required to calculate the following for the above projects: L Payback Period BAJUL 2022/FIN420 (#2) 150,000 150.000 END OF QUESTION PAPER (4 marks) (6 marks) (5 marks) (4 marks) (1 mark) CONFIDENTIAL