Instructions: 1. Write all solution with a pen on a notebook 2. Scan all pages of your solution into one single file and Submit via google classroom only. 2. Your Name and ID number should be written on all Pages of your Solution Please Read the information on the last page.

Question1 (20 marks) HHM Incorporation wants to calculate its overall cost of capital. The company is in the 40% tax bracket, the financial manager has gathered the following information; Common stock: the companys common stock is currently selling at $15 per share and expects to pay dividend of $0.40 per share in the next year. The company dividend has been growing at an annual rate of 8% and this rate is expected to continue in the future. The company is expected to have $300,000

of retained earnings available in the coming year, once these retained earnings are exhausted, the firm will issue new common stock. The new common stock will be underpriced by 0.50 per share, and the floatation costs are $0.30 per share. Preferred stock: The Company issued 10% of preferred stock at its $100per share value. The cost of issuing and selling the preferred stock is expected to be $2 per share.

Long term Debt; The Company can raise debt issuing at $1,000 par value, 12% coupon interest rate, 10-year bonds. It has to sell the bond at a discount of $20 per bond and must pay the floatation costs of $15 per bond.

Required: a. Calculate the Individual cost of each source of financing.

b. What is the companys WACC using the weights shown in the table given below; Source of Capital Weight Common stock 55% Preferred Stock 15% Long term debt 30% Total 100

c. What is the companys WACC if the weights in the table have been adjusted as follows; Source of Capital Weight Common stock 35% Preferred Stock 15% Long term debt 50% Total 100

Question 2 (20 Marks) Tampin Berhad, a manufacturer of paints, uses 3000 liter of chemicals per year. The cost of ordering the chemicals is RM20 per order. The cost of holding the chemicals in the warehouse is RM2 per liter per year. The lead time is 7 days. Required: a. Calculate the economic order quantity (EOQ). b. Determine the Reorder Point of the chemicals. c. The total credit sales of Tampin Berhad in 2018 were RM30 million. Accounts receivable were RM2 million. Calculate the Average Collection Period (ACP)

d. Terachi Berhad sells its product on terms of 7/10 net 30. The total credit sales last year were RM30 million. Accounts receivable were RM2 million. Do customers of Tampin Berhad pay on time? Why?

Question 3 (20 Marks) Real Time Corporation Berhad has 2 million shares of common stock outstanding, net income is $100,000 and the stockholders equity portion of the company is given below; Common stock (2 million shares at $10 par value) $20,000,000 Capital in excess of par 17,000,000 Retained Earnings 33,000,000 $70,000,000 Current market value of the companys stock is $20 per share.

Required; Show the statement of financial position after: a. A cash dividend of $3.00 per share is declared b. A 10% stock dividend is declared (show all workings) c. Explain the meaning of Golden Parachute in Mergers and Acquisition

Question 4 (20 Marks) A Lawrence Industries, operator of a small chain of video stores, purchased $1,000 worth of merchandise on February 27 from a supplier extending terms of 2/10 net 40 EOM. If the firm takes the cash discount, it must pay $980 [$1,000 - (0.02 - $1,000)] by March 10, thereby saving $20. If they decide not to take the cash discount, what will be their cost of giving up cash discount? If there is any available loan that requires a return of 12.5%, Should the company take the cash discount?

B Tenney Company, a large janitorial service company, currently pays its employees at the end of each month. The monthly payroll totals $1,600,000. If the firm were to extend the pay period so as to pay its employees 1 week later Throughout an entire year, how much the employees would in effect be lending the firm for a year? The firm has potential to earn 12% on their investment.

Required:

What is the total amount that Tenney Company can save yearly throughout new payment policy?

Question 5 (20 Marks) Kilang komputer Berhad, a manufacturer of personal computers in Shah Alam, is preparing monthly cash budgets for the month of July, August and September 2017. The following data are available from records of the company:

July August September

RM RM RM Sales 500,000 550,000 600,000 Raw materials purchases 200,000 230,000 150,000 Direct labor 80,000 75,000 85,000

Manufacturing overhead costs 50,000 50,000 50,000 Selling and administration 60,000 70,000 80,000

The company has the following business policies: Collections of cash from customers are expected to be 60% of the sales in the month of sale and 40% in the month following the sale. The company pays cash for 50% of the raw materials purchases in the month of purchase and the balance is due in the month following the purchase. All other items besides these two are paid cash in the month they are incurred.

Other relevant data are as follows: Sales: June 2017: RM450,000 Purchases of raw materials: June 2017: RM 200,000. Other receipts: July, 2017: Cash Dividend received, RM100,000 August, 2017: Cash receipts from sale of used equipment, RM150,000 Other payments: July, 2017: payment of debt: RM25,000 August, 2017: Cash purchase of a new equipment for RM50,000. The company proposed to pay cash dividend of RM 30,000 in August, 2017 and RM 50,000 in October, 2017. Closing Cash balance as at June 30, 2017 is estimated at RM350,000.

Required:

a) Prepare a Cash Budget for Kilang Komputer Berhad for the month of July, August and September 2017.

b) Analyze the Cash Budget for the month of August, 2017.

OBJECTIVE To give students the opportunity to apply acquired concepts in real life case scenarios in Financial Management To challenge students to be original and creative In using accounting information for managerial decision making. To enhance students presentation and report-writing skills.

EXPECTED OUTCOME Students will be able to prepare and analyse Cash budget Student will be able to make practical decisions on Inventory management and control Student will be able to estimate and analyse Current Assets such as Account receivable management, cash management and advance payment. Student should be able to come up with a neatly and professionally written report on the assignment.

SUBMISSION INFORMATION Deadline for assignment submission is 18th November 2020. Project report should be neatly Handwritten Completed work must be submitted with the approved assignment cover page. The name and identification number (ID No.) must be clearly written on ALL pages. There is no limit for the assignment. However students are advised not to compromise on the quality of their work.

Scan/Photo either with your phone or other devices, combine all pages in one file and submit via google Classroom.

MARKING CRITERIA The following is the marks deduction for this exercise: Late submission will result in a penalty of 50% regardless of errors/ mistakes. Not following question requirements will result in a penalty of at least 50% marks deduction. Plagiarism = 0% is awarded immediately. Copy of others work or allowing others to copy your work = 0% is awarded immediately. (This will be check with your handwriting) Off topic work (complete deviation) will result in a ZERO (0) marks being awarded immediately.

RULES AND REGULATIONS It is reasonable to discuss with others possible general approaches to the given scenario and theory. You are NOT allowed to work together (between groups) to get a detailed solution, to copy a solution, or to give away a solution.

If there is too much collaboration from common discussion among groups resulting in very the same format and process (as observed by the marker), this may constitute academic dishonesty and could result in both groups being awarded a zero mark. Do NOT disclose your solution to other group members OR e-mail your solution to anyone. If someone cheats by using your work, you will be penalized