QUESTION THREE

Debt finance is another common source of capital for companies.

Discuss three forms of debt instruments that are available to companies contracting debt finance. (7 marks)

In relation to a company sourcing capital discuss three benefits and short comings of debt finance and contrast these with those of equity finance.

(6 marks)

b) A plant requires the use of 200,000 units of a component for its production. The cost to the company is K5000 per unit. The cost per order is K80, 000 and the carrying cost per unit as percentage of unit cost is 10%.

Determine the economical quantity to order using the EOQ model.(3 marks)

What is the Total ordering Cost to the company? (2 marks)

What is the Total Carrying cost to the company? (2 marks)