Question 1

The following are the balance sheets of Kamanga Invest-trust Bank Ltd., for the years

2017 and 2018 as on 31st March. Prepare a comparative balance sheet and discuss the operational performance of the Bank.

Balance Sheet of Kamanga Invest-trust Bank Ltd Bank Limited: As on 31st March

Liabilities	2017	2018	Assets	2017	2018
Capital Reserve and Surplus Deposits Borrowings: Other Liabilities Provisions	2,845 3,966,009 40,845,783 727,671 1,674,165	2,845 4,765,406 44,042,730 284,690 1,799,197	Cash and balance with Zanco Balance with banks and money at call and short notice Investments Advances Fixed assets Other assets	2,706,808 1,136,781 21,421,060 19,599,764 493,996 1,858,064	2,237,601 1,607,975 23,537,098 21,129,869 536,442 1,835,883
	47,216,473	50,894, 868		47,216,473	50,894,868

[25 Marks]

Question 2

Calculate the Trend Analysis from the following information of Kamanga Invest-Trust

Bank Ltd., taking 2010 as a base year and interpret them (in thousands).

Year	Deposits	Advances	Profits
2010 2011 2012 2013 2014 2015	20,559,498 26,645,251 31,980,696 37,299,877 40,845,783 44,042,730	9,714,728 12,550,440 15,883,495 17,726,607 19,599,764 19,599,764	350,311 406,287 504,020 553,525 637,634 806,755

[25 Marks]

Question 3

Compute the market value of the firm, value of shares and the average cost of capital from the following information.

Net operating income	K 100,000
Total Investment	K 500,000

Equity capitalization Rate:

1. If the firm uses no debt 10%
2. If the firm uses K 25,000 debentures 11%
3. If the firm uses K 400,000 debentures 13%

Assume that K500, 000 debentures can be raised at 6% rate of interest whereas K400, 000 debentures can be raised at 7% rate of interest.

[25 Marks]

Question 4

Mulenga Company Ltd. expresses a net operating income of K100, 000. It has K200, 000 to 7% debentures. The overall capitalization rate is 10%.

(a) Calculate the value of the firm and the equity capitalization rate (or) cost of equity according to the net operating income approach.

(b) If the debenture debt is increased to K600, 000. What will be the effect on the value of the firm, the equity capitalization rate?

[25 Marks]