Question One Part 1 A firm has been able to raise capital outlay of KS5, 000 to invest in the wholesale of commodities. The managers discussed in the meeting that taking into account a number of factors they will consider the project to be a success if the investment is recovered in three years. The discount rate used is 15%. The expected cash flows from the investment over six year is as follows. Year Year 2 Year 3 Year 4 Year 5 Year 6 K15.000 K35.000 K20,000 K10.000 K5,000 K10,000 Required 1. State and briefly comment on the concept of Time Value of Money (2 Marks) 2. Calculate the payback period and comment whether managers should accept the investment (2 Marks) 3. Calculate the net present value at the discount rate of 15% and advice the managers whether they should accept the investment or not based on your calculations (5 Marks) Part 2 Managers may be under pressure to ensure that the investment yield good results. A board mecting was held to discuss the acquisition of controlling shares in another entity for the reason that it might boost income levels of the company, Required 1. Make commentaries on the vitals features of debt finance and equity finance (8 Marks) 2. State and explain the agency relationship between shareholders and management in companies and how it may result in the agency problem. (6 Marks) 3. State and make commentaries on the four types of decisions managers are required to make in an organization. (4 Marks) 4. Differentiate between systematic risks and unsystematic risks (6 Marks) 2 Page Part C Comment on the following as measures of corporate success i. Wealth maximisation Profit maximisation iii. Earnings per share (EPS) ii. (9 Marks)