PGBM01 Financial Management And Control Assessment Answer

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Question :

UNIVERSITY OF SUNDERLAND

LEVEL M

MODULE: FINANCIAL MANAGEMENT & CONTROL

ASSIGNMENT CODE: PGBM01

Assessment weight: 100% of module

Outcomes Assessed: All module learning outcomes, knowledge and skills, are assessed in this assignment.

This assessment is in three parts, please answer all elements.

PART 1 (40%)

The following are extracts of the Income Statement and Balance Sheet of FOX Sdn Bhd


2019 (RM)
2020 (RM)
Non-current Asset


Vehicle
20000
18000
Furniture
8000
5000

28000
23000
Current Assets


Inventory
4900
13700
Receivable
8800
11600
Balance at Bank 
13900
11500
Cash In hand 
2600
4200
Total current asset
30200
41,000



Current Liabilities
16700
30800

41500
33200
Shareholders’ equity 
20000
20000
Retained Profit
16000
12500
General reserve
5500
700

41500
33200



Sales
30000
40000
Cost of Sales 
8000
9000
Net Profit
16000
18500



Dividend Per Share
12 cents
18 cents
Number of Shares Issued
20000 units
20000 units
Average share price
RM 2.50
RM 3.30


The following are the industry ratios obtained: 

  1. Gross Profit Margin – 65%
  2. Net Profit Margin – 55%
  3. Receivable Collection Period – 68days
  4. Earning Per Share – 50 cents
  5. Dividend Yield – 3.2%
  6. PE ratio – 6.5 times

You are required to calculate the following ratios for both years

  1. Gross Profit Margin( 2.5Marks)
  2. Net Profit Margin( 2.5 Marks)
  3. Current Ratio( 2.5 Marks)
  4. Quick Ratio( 2.5 Marks)
  5. Receivables Collection Period( 2.5 Marks)
  6. Earnings Per Share( 2.5 Marks )
  7. Price Earning Ratio( 2.5 Marks )
  8. Dividend Yield( 2.5 Marks )

b. You are required to analyse and comment on the:

-  Profitability

-  Efficiency

-  Liquidity

-  Investor Ratio

PART 2 ( 25%)

Mr. Alfred, the Finance Director of MICO Sdn Bhd, is planning to raise funds to fund an acquisition project. He has decided to use the following sources.

  1. Issue bonds amounting to RM 2.5 M with an annual coupon rate of 6.5%.
  2. Issue 500000 units of preferred shares for RM2 each with a fixed dividend rate of 8%
  3. Issue 100000 units of ordinary shares for RM5 each. Mr. Alfred expect to pay an annual dividend of 10% to all its ordinary shareholders.

Given that the tax rate of the company is 26%.

You are required to:

  1. Calculate the total funds Mr. Alfred wants to raise to fund the acquisition.
  2. Calculate the net cost of debt of the bonds issued.
  3. Calculate the WACC for the total funds raised by the acquisition.
  4. Another Director of the company argued that the company should not raise too much funds through bonds. He proposed to raise the fund using the following sources:
  5. Borrow RM 3M from a bank which charge an interest of 8.5%
  6. Issue 500000 units of Preferred Share for RM2 each with a fixed dividend of 10%. 

You are required to justify which options of funding is better. Show all your calculations to support your justifications.  You have to consider other non-financial factors to justify your answer.

( 17 Marks) 

(Total : 25 Marks)

PART 3 ( 35% )

Below is the net operational cash flow of 2 investment schemes, X and Y.

Year
X
Y
0
(82,000)
(82,000)
1
20,000
30,000
2
30,000
30,000
3
40,000
40,000
4
40,000
50,000
5
50,000
30,000


 Given that the residual value for X and Y are RM18,000 and RM22,000 respectively while the required rate of return is 12%.

  • You are required to calculate, for both schemes, the:
  1. Payback period.           
  2. Accounting Rate of Return           
  3. Net Present Value          
  4. Internal Rate of Return         
  • Discuss the superiority of IRR over NPV in appraising investment decision.
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Answer :

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