1. TRUE or FALSE: All virtual currencies are digital currencies, and all currencies are virtual currencies.

Triad Limited is considering the launch of a new product for which an investment of USD 9 million in plant and machinery will be required. The production of the product is expected to last for five years, after which the plant and machinery will be sold for USD 2.25 million.
2. Additional information
 The product would be sold for USD 900 per unit with a variable cost of USD 360 per unit.
 Fixed production costs (excluding depreciation) would amount to USD 900,000 per annum.
 The company applies the straight-line method of depreciation.
 The cost of capital is 12% per annum
 The corporation tax is 30%
 The number of units of expected to be produced and sold per annum for the next five years is shown below:

Required: Advise the management of Triad Limited on the appropriate course of action using:
i. The net present value(NVP) approach.
ii. The internal rate of return (IRR) approach.

3. TRUE or FALSE: If the project risk = company risk, then the Discount Rate = Cost of Capital.

4. A company has capital employed of US$375,000 and a long-term debt-equity ratio of 30%. Debt carries a 9%  interest rate. If the profit before interest amounts to US$37,500, what is the return on shareholders’ funds?

5. TRUE or FALSE: If Mary expects to receive USD 25,000 in 2 years and the interest rate is 8% per year, compounded annually, the present value is USD 21,000

6. TRUE or FALSE: The Miller and Orr cash management model follows a constant consumption rate.

7. If Safari Limited has 360,000 shares of common stock authorized, 225,000 shares of common stock issued, and 18,000 shares of common stock as treasury stock, what is the total number of outstanding common shares?

The Padex publishers specialize in writing and printing various educational publications. It is a small but publicly traded company. Padex currently has a capital structure of USD 18 million in bonds that pay an 8% coupon, USD 7.5 million in preferred stock with a par value of USD 45 per share, and an annual dividend of USD 2 per share. The company has common stock with a book value of USD 9 million. The cost of capital associated with the common stock is 15%.
The marginal tax rate for the firm is 30%.

8. Required: Calculate Padex’s cost of capital on a weighted average basis

9. A four-year bond was issued at a face value of USD 50,000 on January 1, 2025. The coupon rate is 8%. The market price is 9%.

Required: Calculate
i. The bond’s issue price(Bp)
ii. The discount amount(Ds)
iii. The interest expense(Ie)

10. TRUE or FALSE: If a USD 1,000 investment is held for five years in a savings account with 10% simple interest paid annually, the FV of the USD 1,000 investment is USD 1,100.

11. Billy has USD 15,000 in savings and expects to earn 6% interest on that sum annually for the next two years. Assuming the interest rate is only computed annually, what is the future value of his USD 15,000?

12. TRUE or FALSE: A company's working capital comprises its fixed assets minus its long-term liabilities.

John borrowed USD 5 million from a Rafiki Bank at the rate of 2.5% per month. The loan is to be repaid monthly over a period of 6 months. Interest on the loan is to be paid on a reducing balance basis.
13. Required: Prepare a loan amortization schedule and calculate the total interest paid.

14. Fedha Company Limited has on its books the following amounts and specific costs for each type of capital:

Required: Determine the weighted average cost of capital using:
i. Book value weights (Bv-WACC)
ii. Market value weights(Mv-WACC)

15. TRUE or FALSE: Under Islamic Banking, the use of money for the purposes of making more money is forbidden only if the interest is above an agreed rate.

16. The share capital of Matex Limited consisted of 125,000 ordinary shares of US$0.50 each and US$65,000 of 8% preference shares. The directors proposed dividends on the preference shares and a US$0.20 dividend per ordinary share. Total proposed dividends were equivalent to one-quarter of profits before appropriation.

Required: Calculate the amount of retained profits for the year.

Rhine Limited is considering investing in a plant that is expected to operate for the next four years, after which it will have no salvage value.
i.The plant will cost USD 7.5 million.
ii. Annual tax depreciation of 20% will be allowed in respect of the expenditure.
iii. Revenue from the plant will be as follows:

17.

iv. Incremental costs will be USD 6 million throughout.
v. Rhine Limited pays corporate tax at 30% and has a cost of capital of 10%.
Assume that all cash flows occur at the end of the year to which they relate.

Required
Advise Rhine Limited on whether to proceed with the investment.

18. Calculate the expected return E(R) and the standard deviation (SD)of returns for a stock having the following probability distributions of returns:

19. The return on capital employed is used to measure:

20. An ________ market is a type of decentralized market without physical locations where trading is conducted electronically and the participants trade securities directly without a broker.

21. Which of the following statements about Mudarabah arrangement is/are true?

22. TRUE or FALSE: A firm’s value depends on its growth opportunities, which rely on its ability to attract capital.

23. In reference to Islamic finance,(i)._______refers a form of trade credit for asset acquisition that avoids the payment of interest,(ii).______is a lease finance agreement whereby the bank buys an item for a customer and then leases it back over a specific period at an agreed amount,(iii). ________refers to bank a form of equity finance in which the bank and the customer share any profits, and (iv).______is a joint venture or investment partnership between two parties, whereby both parties provide capital towards the financing of projects and share the profits in agreed proportions.

Shabet Limited has found out that, after two years of using a machine, a more advanced model has arrived in the market. The advanced model is expected to increase output.
• The existing machine had cost USD 80,000 and was being depreciated using the straight-line method over ten(10) years.
• The current market value of the existing machine is USD 37,500.
• Shabet Limited is considering the acquisition of the advanced model, which costs USD 1,235,00,0 including installation costs, and has a savage value of USD 51,250
At the end of its useful life. The following data has been provided:

24.

The required rate of return is 16%. Ignore taxation.

Required: Compute the following with respect to the new machine
i. Payback period(PB)
ii. Net Present Value (NPV)
iii. Internal rate of return (IRR)

25. Volta Limited's earnings and dividends over the last five years have steadily increased as shown below:

James, a prospective investor, is considering buying shares of this company, which are currently selling at USD 60 each. The investor’s minimum required rate of return is 15%

Required
Advise the investor on whether he should buy the shares of the company or not.

26. There are three(3) common approaches to project selection; the (i).________which determines how long it would take a company to see enough in cash flows to recover the original investment (ii). the _______ , which is used to calculate the expected return on a project , and (iii).________ , which show how profitable a project will be versus alternatives and is perhaps the most effective of the three methods.

27. Ufanisi is considering raising an additional USD 20 million to finance an expansion programme. The firm’s capital structure, which is considered to be optimal, is given as follows:

The firm expects to raise USD 2 million from internal sources. The firm pays a constant ordinary dividend of USD 2 per share in each year. This is expected to remain so in the foreseeable future,
Additional information
(i). The firm will issue new ordinary shares at a current price of USD 30 per share and will incur a floating cost of USD 10 per share
(ii) New 9% irredeemable debentures will be issued at par of USD 100 each. The floatation cost of 10% of the par value will be incurred
(iii) New 20% preference shares will be issued at USD 60 each. Par value of each share is USD 85. Floatation cost of USD 15 per share will be incurred.
(iv). The Corporate tax rate applicable is 30%
Required
Weighted marginal cost of capital of the firm.

28. TRUE or FALSE: Given two investment options with option A having a fixed annual return of 25% on a fixed basis, and option B a market-linked security providing a return as per market performance, a risk-averse individual will choose option B.

29. The _________rate of return refers to the return on investment that an investor anticipates receiving.

30. Luke deposited USD 6,250,000 million in a fixed deposit account in ABC Bank for a period of 20 years. The amount attracted annual compound interest at the rate of 14% for the first 8 years,10% for the next 7 years, and 9% for the remaining 5 years.

Required
The value of the investment at the end of 20 years.

31. TRUE or FALSE: A green shoe provision typically allows underwriters to sell up to 15% more shares than the original issue amount.

32. TRUE or FALSE: A share redemption occurs when the management of a public company buys back company shares that were previously sold to the public.

33. In ________, a business person agrees to pay the cost of the equipment in different installments over a period of time.

34. _______refers to the management of financial resources aimed at increasing the value of a business in order to increase the value of the shares held by its stockholders.

35. A__________company refers to a business owned by its investors, with each investor owning a share based on the amount of stock purchased.