Question Two a) A student requires K11,000 to clear an outstanding balance before graduating in two years time. How much should s/he invest at 9% compounded quarterly for him or her to have the required amount to pay the university at the end of the two years? 5 marks b) Use both the Net Present Value (NPV) and the Internal Rate of Return (IRR) to assess and draw conclusions when advising Mrs Mulenga who is wondering whether to spend K18m on an item of equipment to start her business, in order to obtain cash profits as shown below: Year Km 1 6 2 8 3 5 4 1 Note: Mrs Mulenga requires a return of 10% per annum. 8 marks

c) i. Mrs Mulenga wants to form a business and has come to you, a managerial finance manager for advice on a sole proprietor; what is your advice to Mrs Mulenga?

ii. Unfortunately Mrs Mulenga has no idea on the importance of working capital for a sole trader. Discuss the likely conversation you would have with her.