Financial Management | My Assignment Tutor

LOCATION: LondonLLEOLIAD: CAERFYRDDIN/ LLAMBED/abertaweLEVEL 6LEFEL 4/5/6/7EXAMINATION PERIODCYFNOD ARHOLIADAUmay 2017IONAWR 2016/ mai 2016/ Gorffennaf 2016 MODULE CODE: SBUS6113 International Financial Management TIME: 3 HOURS SECTION A: answer ALL quESTIONS SECTION B: answer 0NE quESTION Equipment or materials required – Calculator & Formulas Adnoddau neu ddefnyddiau sydd eu hangen – Dim Section A: Answer ALL questions Question 1 Your company, Living Planet plc, was formed in 1985 to develop technologies that combat climate change. You started the firm with £80,000 financing which consists of 3,000 shares of equity amounting to £60,000 and a £20,000 bank loan. The company is listed on the small companies exchange and have accumulated earnings of £120,000. The share price is £7.50. You plan to expand the firm into solar technologies and have agreed to issue 1,000 new shares to a foreign investor. Construct the equity statement for your company before and after the share issue. The statement must include the total par value, additional paid in capital, and book value per share. (15 marks) Provide a brief discussion of the types and characteristics of debt and equity securities. (10 marks) If a company was to go into liquidation, which claims would have higher priority: bonds or equity? Why? How would you deal with hybrid securities in liquidation? (5 marks) (Total 30 marks) Question 2 On March 29, 2004, the €/$ exchange rate was €0.82/$ compared to €0.94/$ exactly one year before. On the same day, the £/$ exchange rate was £0.56/$ compared with £0.62/$ one year earlier. Calculate the percentage appreciation of the euro against the dollar over the previous year. Calculate the percentage appreciation of sterling against the dollar over the previous year. (10 marks) Calculate the percentage appreciation or depreciation of sterling against the euro over the previous year. Calculate the percentage appreciation or depreciation of the euro against sterling over the previous years. (15 marks) Does the percentage appreciation or depreciation of sterling in (b) equal the euro depreciation or appreciation multiplied by negative one? Explain your answer. (5 marks) (Total 30 marks) Section B: Answer ONE question Question 3 Beta Company is considering entering the market for cleaning fluids. The product is to be called splurge. Estimated sales are as follows: YearPackets1100,0002120,0003130,0004100,000550,000 The selling price will be £2.00 per packet. The product will require plant at a cost of £200,000 on land already owned by the company but which could be sold for £100,000. In five years it is estimated that the salvage value of the plant will be £20,000. So far, £20,000 has already been spent on developing splurge. Each packet will require materials at 50p per packet and packaging costs at 10p per packet. Total labour will be fixed at £50,000 per year and the plant will require further fixed costs of £30,000 per year excluding depreciation. There will also be a marketing cost of £10,000 per year. Depreciation policy is straight-line over the life of the plant based upon initial value less salvage value. Net working capital required will be £1,000 per year. Cost of capital is 5% Evaluate the project using the NPV method. (20 marks) Discuss the various investment appraisal methods Beta Company could use. In your discussion, comment on the advantages and disadvantages of other methods. (15 marks) On balance, given your discussion in (b), which method would you choose to use as a financial manager. Explain why? (5 marks) (Total 40 marks) Question 4 Consider the following financial statement information for the Orologio SpA: ItemBeginningEndingInventory€44,234€34,048Accounts receivable43,211 35,532Accounts payable35,60353,503Net sales€360,302Cost of goods sold120.400 Calculate the operating and cash cycles. How do you interpret your answer? (20 marks) What is working capital? Identify the objectives of working capital management and discuss the conflicts that may arise between them. (15 marks) List and provide brief comment on possible ways in which a company can increase its cash levels so as to improve liquidity. (5 marks) (Total 40 marks) Diwedd/End

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