QUESTION ONE (15 marks) a. Bee ltd has the following proposed independent projects for the financial year starting 1st July 2018. Project Net Investment Present Value of Future Net cash flow Cumpilat Outlay sh '000' sh'000 1000 A 500 1000 -0.5 1000 2500-6-4 -1,5000 400 300 1-3 -1800 D 300 E 200/ 400 075 300 674 -2200 -250 i. Required: investments of projects untestaxon by a Come the amount Assuming that there is no capital rationing which projects should be selected. is the act of playing doston marks of ii. Assuming a single period internal capital constraint of sh 1,700,000 is imposed indicate which projects should be selected. 6 marks b. The initial cash outlay of a project is sh.200,000 and it can generate net cash flows of sh.80,000,sh.60,000 sh.100,000 and sh.40,000 in year one through year 4. Assume a discount rate of 11.5%. Calculate the project's profitability index. Cash duw 5 marks Year coshifion of discount. Cesh flow QUESTION ONE Is a Principle that is used to explain & resolve issues nexationship btw business principaus & their agents. (a) Describe agency theory [2 marks] (b) Outline the assumptions of basic EOQ model. [6 marks] (c) What is economic order quantity for a firm with a daily consumption of 30 units per day with ordering goods of Ksh.250 per order and the price of the items is Ksh.25 per unit stock holding cost is 11% per annum. Assume 300 working days in a year. [6 marks] (d)M intend to invest in a project whose initial cost is shs. 120 000 000. The project is expected to leave an economic life of 8 years. Annual cash flows expected from the project are as follows: Year Cash flows (000) 1 20 000 18 000 23456 22.000 28 000 42 000 6 12.000 7 28.000 8 17 000 Required: Determine the pay back period, [10 marks] 1. Ordering b2 2 Denver Delivery 3. late Cost is Cons time is Cost demand is cons demand is known SAM'S CAMPUS SOLUTIONS Your Guide to Academic Excellence, Modules & Past Papers Cell 0721 710 888 mt price Constant S There is 6. Restoring by the who