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Financial Management (Online)

The document is a sample exam for a financial management course. It contains 4 questions: 1) Directors of a new security company are expected to make investment, financing, and dividend decisions. They need briefing notes on the objectives and 2 specific decisions for each area, plus 2 external factors to consider. 2) A finance company offers an investment that pays $44,650 after 5 years of $6,000 annual deposits. Calculate the implicit interest rate. Explain time value of money. 3) A stock pays a $1 dividend and is priced at $15. If dividends grow at 5% forever, calculate the implied yield, expected dividend yield, and expected capital gains yield.

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40 views1 page

Financial Management (Online)

The document is a sample exam for a financial management course. It contains 4 questions: 1) Directors of a new security company are expected to make investment, financing, and dividend decisions. They need briefing notes on the objectives and 2 specific decisions for each area, plus 2 external factors to consider. 2) A finance company offers an investment that pays $44,650 after 5 years of $6,000 annual deposits. Calculate the implicit interest rate. Explain time value of money. 3) A stock pays a $1 dividend and is priced at $15. If dividends grow at 5% forever, calculate the implied yield, expected dividend yield, and expected capital gains yield.

Uploaded by

mehmood khan kkart
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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ALHAMD ISLAMIC UNIVERSITY

FINAL TERM EXAMINATION SPRING 2023 (Online)


BBA-II-III-IV (2Years), MBA EX-II, MBA-II
Financial Management
Max Marks: 40
Note: Attempt all questions. Date: 22-06-2023

QNO1 K-Force Ltd, a newly established security company, has constituted its first board of directors.
The directors are expected, among others, to take financial decisions in the areas of investment,
financing, and dividend payment. A consultancy firm has been engaged to run an orientation
program for the directors in the coming week.

You work with the consultancy firm that has been engaged to run the orientation program
for the new directors. You have been asked by your boss to prepare briefing notes on the
specific roles the directors are expected to play in the three fundamental decision areas and
the constraints that government policies might impose on them.
Required:
(a) Prepare a briefing note on the nature of the three fundamental decision areas. Specifically,
the briefing notes should cover the objective of each class of decision;
(b) TWO (2) specific decisions the directors are expected to take in each class of financial decisions; and
(c) TWO (2) factors in the external environment they should consider when making financial decisions.
(10)
QN02
(a) A finance company offers to pay Rs. 44,650 after five years to investors who deposit
annually Rs. 6,000 for five years. Calculate the rate of interest implicit in this offer. (05)
(b) Explain the importance time value of money analysis in modern era with examples? (05)

QN03 Just today, Acme Rocket, Inc.’s common stock paid a $1 annual dividend per share and had a
closing price of $15. Assume that the market expects this company’s annual dividend to grow
at a constant 5 percent rate forever.
Required:
(a) Determine the implied yield on this common stock.
(b) What is the expected dividend yield?
(c) What is the expected capital gains yield?
(10)
QN04 A $1,000-face-value bond has a current market price of $935, an 8 percent coupon rate,
and 10 years remaining until maturity. Interest payments are made semiannually.
Before you do any calculations, decide whether the yield to maturity is above or below the
Coupon rate. Why?
(a) What is the implied market-determined semiannual discount rate (i.e., semiannual yield to maturity) on this
bond? (05)
(b) Using your answer to Part (a), what is the bond’s (i) (nominal annual) yield to maturity? (ii) (effective annual)
yield to maturity? (05)

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