QUESTION ONE $[25]$

$1\mathrm{.}1$ Analyse the various goals of Financial Management. $(12)$

$1\mathrm{.}2$ Evaluate the maximising of shareholder value in relation to the ethical behaviour of

companies. $(5)$

$1\mathrm{.}3$ Differentiate between primary and secondary financial markets. $(4)$

$1\mathrm{.}4$ Distinguish between money and capital markets. $(4)$

QUESTION TWO $[25]$

Eseyl Industries Ltd uses a combination of shares and debt in their capital structure. Details of their

capital structure are provided below:

$$ There are $12000000$ R$6$ ordinary shares in issue and the current market price is R$11$ per share.

The latest dividend paid was R$1\mathrm{.}62$ and a $11\%$ average growth for the past six years was

maintained.

$$ The company has $5200000$ R$6,12\%$ preference shares with a market price of R$7\mathrm{.}80$ per share.

$$ The company has a public traded debt with a face value of R$17000000.$ The coupon rate of the

debenture is $11\%$ and the yield to maturity of $16\%.$ The debenture has $5$ years to maturity.

$$ The company also has a bank overdraft of R$7000000$ due in $4$ years$$ time and interest is

charged at $16\%$ per annum.

Additional information:

$1.$ The company has a beta of $2\mathrm{.}1,$ a risk$-$free rate of $8\mathrm{.}9\%$ and a return on the market of $17\mathrm{.}3\%.$

$2.$ Company tax rate is $28\%.$

Required:

$2\mathrm{.}1.$ Calculate the weighted average cost of capital, using the Gordon Growth Model to calculate

the cost of ordinary shares. $(22)$

$2\mathrm{.}2.$ Calculate the cost of ordinary shares, using the Capital Asset Pricing Model. $(3)$

QUESTION THREE $[25]$

Telin Ltd purchased a new tractor at a cost of R $80000.$ Annual operating cash inflows are expected

to be R $30000$ each year for four years. At the end of the tractor$$s useful life, the salvage value of

the tractor is expected to be R $5000.$

Required:

$3\mathrm{.}1.$ The company requires a payback period of not more than $5$ years. Indicate, based on this criterion,

whether the project should be accepted. $(8)$

$3\mathrm{.}2.$ Calculate the Net Present Value if the Cost of Capital is $12\%($ignore taxes$).$ Indicate with reasons

whether based on this calculation that this project should be accepted or not. $(12)$

$4\mathrm{.}3.$ Outline the advantages and disadvantages of the Payback Period method. $(5)$

QUESTION FOUR $[25]$

The following information was obtained from the financial statements of Cartoo Ltd for the year

ended $28$ February $2023$:

R

Sales $500000$

Cost of Sales $300000$

Gross Profit $200000$

Current Assets $150000$

Current Liabilities $50000$

Inventory $50000$

Debtors $80000$

Creditors $40000$

Additional Information:

$$ Credit sales are equal to $20\%$ of the total sales.

$$ Credit purchases for the financial year is R$20000.$

$$ Inventory for the previous year amounted to R $50000.$

$$ Debtors for the previous year amounted to R $80000.$

$$ Creditors for the previous year amounted to R $40000.$

REQUIRED:

$4\mathrm{.}1$ Calculate the Current Ratio. $(3)$

$4\mathrm{.}2$ Calculate the Acid$-$test Ratio $(3)$

$4\mathrm{.}3$ Calculate the Stock turnover rate $(3)$

$4\mathrm{.}4$ Calculate Debtors collection period $(3)$

$4\mathrm{.}5$ Calculate the Creditors payment period $(4)$

$4\mathrm{.}6$ Analyse the liquidity position of the business from the above calculations. $(5)$

$4\mathrm{.}7$ Outline the reasons for a company having a:

$4\mathrm{.}7\mathrm{.}1$ High stock turnover $(2)$

$4\mathrm{.}7\mathrm{.}2$ Low stock turnover $(2)$