Solution Maf503 - Jun 2018
Solution Maf503 - Jun 2018
Solution Maf503 - Jun 2018
Suggested solution
Question 1
(22√ x ½ = 11 marks)
1. Net profit margin of Kossin is very low as compared to Nilax. √ This might due to high
cost of goods sold and operating expenses. Kossin must control their expenses
efficiently. √
2. Debt ratio of Kossin is higher as compared with Nilax. √This shows that the company
is in a higher risk position in a recession. A further loan in future might be difficult to
obtain. √
Or any other acceptable answers
(4√ x 1= 4 marks)
(3 x 1 = 3 marks)
Total: 18 marks
1
MAF503 – JUNE 2018
Question 2
B.
C.
i. Current ratio = RM50,500,000 = 1.11
RM45,500,000
Total Debt/Total Asset = RM130,500,000 = 52%
RM250,500,000
(4 x ½ = 2 marks)
ii. Working capital policy applied by Helena Bhd is the conservative approach. The
company’s RM50,500,000 Current Assets is being financed by only RM45,500,000 of
Current Liabilities. This would mean that the balance of RM5 million is being financed
by Long Term funds.
( 2 marks)
iii. The company can apply the hedging principle by increasing its current liabilities by
RM5 million and reduce its long term debt by RM5 Million.
( 2 marks)
(Total: 20 marks)
2
MAF503 – JUNE 2018
Question 3
i) Initial OutlayX RM
Purchase price 500,000 √
Installation 15,000 √
Modification 3,000 √
Transportation 2,000 √
DEPRECIABLE VALUE 520,000
Training nil √
Compensation expense 30,000 √
Increase in inventories 20,000 √
Increase in trade creditors (5,000)
TOTAL OUTFLOW 565,000
Inflow: Sales proceed (100,000) √
Tax Saving (12,000) √√
INITIAL OUTLAY 453,000 √
Workings:
Disposal: RM Depreciation: RM
Cost 300,000 old: 300,000 – 0 30,000
10
Less: acc. depreciation 150,000
3
MAF503 – JUNE 2018
4
MAF503 – JUNE 2018
= 14% + 0.12%
= 14.12%
( 453,000 – 365340) = 0.61√ so the payback period = 3 years + 0.61 year = 3.61
years√.
142,680
(38√ x ½ = 19 marks)
b) Yes √, the company should buy the new machine because NPV is positive√ and the
payback period is within 4 years. √
(3 √ x 1 = 3 mark)
(Total: 24 marks)
5
MAF503 – JUNE 2018
QUESTION 4
A. (i) kd = Interest
Net Price
= (8% x 100) = 8
RM110- 20 90
= 0.0888 @ 8.88%
QUESTION 5
6
MAF503 – JUNE 2018
A.
i. Identify three (3) problems associated with the goal of profit maximization.
Profit maximization is a short term concept
Profit maximization does not consider the timing of returns
Profit maximization ignore risk
Profit maximization concentrates on earning per shares
C.
190 √
Project B = = 0.176
1080 √
1
(8√ x = 4 marks)
2
b) Mr leow would choose project B√ since the higher the CV, the higher the
risk. √
1
(2√ x = 1 marks)
2
7
MAF503 – JUNE 2018
Select projects A and B for an investment of RM3 million. √ RM3 million × 0.4 =
RM1.2 million√ will be through debt financing√ and RM3 million × 0.6 = RM1.8
million√ will be through equity financing. √ Therefore, the total dividend payment is
RM3 million – RM1.8 million = RM1.2 million. √
(6√ x 1= 6 marks)
END OF SOLUTION