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FTL821S - FINANCIAL TECHNIQUES FOR LOGISTICS MANGEMENT OPERATIONS - 1ST OPP - NOV 2022 |
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nAmlBIA unlVERSITY
OF SCIEn CE Ano TECHn
FACULTYOF COMMERCE, HUMAN SCIENCEAND EDUCATION
DEPARTMENT OF MARKETING, LOGISTICSAND SPORTMANAGEMENT
QUALIFICATION: BACHELOROF LOGISTICSAND SUPPLYCHAIN MANAGEMENT HONOURS
QUALIFICATION CODE: 08LSCH
LEVEL: 8
COURSECODE: FTL821S
COURSE NAME: FINANCIAL TECHNIQUES FOR LOGISTICS
MANAGEMENT OPERATIONS
SESSION:NOVEMBER 2022
PAPER:THEORYAND PRACTICAL
DURATION: 180 MINUTES
MARKS: 100
EXAMINER
FIRSTOPPORTUNITY EXAMINATION QUESTION PAPER
Mr. Twiitedululeni Nakweenda
MODERATOR
Mr. Johannes Ndjuluwa
INSTRUCTIONS
1. This question paper consists of six pages including this cover page.
2. Start with the question that you understand best, and please number all your answers clearly,
and correctly.
3. Avoid any form of academic dishonesty.
4. Where applicable, please show all your workings.
5. Students should use their intuitions to deal with any perceived ambiguities, and all
assumptions made should clearly be indicated as such.
6. For qualitative answers, the number of marks allocated should serve as the basis for the length
of your answer.
7. Unless otherwise stated, round off all your final answers to two decimal places.
8. The use of Financial Calculators or PV/FV Tables is permitted.
9. Strictly, pencil work shall be marked.
-*THE PAPERCONSISTOF 5 PAGESINCLUDING THIS COVERPAGE+ 1 PAGE OF PV & FV TABLE
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QUESTION 1
(25 MARKS, 45 MINUTES)
Suppose your entity is contemplating to purchase a new motor vehicle as a way of increasing its fleets in
five years' time. The value of the motor vehicle is estimated at N$350 000. No deposit would be required.
In order to make this happen, your entity decides to invest N$25 000 at 12% per annum each year for the
next five years. The investment should be made at the end of each year. Accordingly, your entity would
be required to top up for any shortfall should there be any. Luckily, your entity's bank is willing to finance
the shortfall, payable at 10% interest per annum over five years' equal annual instalments.
REQUIRED:
1.1. What type of annuity implied in above?
1.2. Determine the value of your entity's investment at the end of five years.
1.3. Is the investment sufficient to cover the total purchase.
1.4. What made up an instalment?
1.5. Based on your answer in {1.3), calculate the instalment to be paid at 10% interest over
five year period.
1.4. Prepare an Amortization table based on the shortfall obtained in 1.3, and the
instalment figure you have calculated in (1.5). Show all the applicable columns.
TOTAL MARKS
MARKS
2
5
2
2
3
11
25
QUESTION 2
(25 MARKS, 47 MINUTES)
Consider the following data which has been extracted from the records of two rival Suppliers in
a manufacturing industry.
Income Statement for the year ended 31 December 2021
Sales revenue
Less:Cost of sales
Gross profit
Less:Operating expenses
Profit before interest and tax
Interest paid
Profit before tax
Taxation @ 30%
Profit after tax
Notes
1
SUPPLIERS
A
150,000.00
90,000.00
60,000.00
25,000.00
35,000.00
5,000.00
30,000.00
9,000.00
21,000.00
B
135,000.00
75,900.00
59,100.00
12,000.00
47,100.00
6,000.00
41,100.00
12,330.00
28,770.00
2
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Balance Sheet as at 31 December 2021
ASSETS:
Total Non-current assets
Total Current assets
TOTAL ASSETS
EQUITY AND LIABILITIES:
EQUITY:
Common equity
Retained earnings
TOTAL EQUITY
LIABILITIES:
Total Long-term debts
Total Short-term debts
TOTAL LIABILITIES
TOTAL EQUITY AND LIABILITIES
Notes
2
SUPPLIERS
A
B
500,000.00
300,000.00
800,000.00
480,000.00
220,000.00
700,000.00
350,000.00
21,000.00
371,000.00
317,000
112,000
429,000
800,000
250,000.00
28,770.00
278,770.00
326,230
95,000
421,230
700,000
Notes:
1. For each company, 20% of sales revenue is cash and the balance is on credit.
2. Accordingly, for each company, 15% of total current assets represents inventory,
same figure represents accounts receivable.
NB: Assume a 365 days-calendar year.
while
10% of the
REQUIRED:
2.1. Using the information provided, for each supplier, compute the following ratios and
comment on results:
a. Current ratio;
b. Quick ratio;
2.2. Using the information provided, for each supplier, calculate the following ratios and
assuming that you are to pick one of the two suppliers as your potential supplier,
comment on the results.
a. Net profit margin;
b. Gross profit margin;
C. Average collection period;
d. Accounts receivable turnover;
e. Inventory turnover;
f. Days sales in inventory;
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9
16
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I
I g. Debt ratio.
TOTAL MARKS
QUESTION 3
25
(15 MARKS, 27 MINUTES)
As a way of raising finance to finance capital projects, suppose your organization has issued a N$ 1 000
bond with a coupon rate of 10% per annum paid annually, and promises to pay back the principal in five
years. Suppose the current market interest rate on similar bonds is 10%.
REQUIRED: Carefully, answer the following questions:
3.1. Distinguish between a bond holder and bond issuer, and explain how your
organization is called in this transaction.
3.2. Compute the value of this bond today as per the given information, and state how
it is trading.
Suppose no change in the coupon rate. What would happen if:
3.3.
i. Current market interest rate increases by 10%.
ii. Current market interest rate decreases by 10%.
TOTAL MARKS FOR QUESTION 4
MARKS
2
4
9
15
4
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QUESTION 4
(25 MARKS, 47 MINUTES)
Suppose your organization is considering to invest in one of the following mutually exclusive projects. It
is your organization's policy to accept projects of this nature on the basis of their risk profile which it
measures through each project's standard deviation. The expected returns at various states of the
economy are provided as follows:
Statement of the economy
Normal
Boom
Recession
Probability
30%
50%
20%
Project A
10%
15%
-10%
Project B
12%
18%
-6%
Project C
8%
12%
-4%
REQUIRED: Carefully answer the following questions within their context.
4.1. What does the risk-return tradeoff say as far as investments are concern?
4.2. Mention two types of risk categories and state which one cannot be diversified,
and why? For each, identify the statistical measure that can be used to measure
it.
4.3. On the basis of standard deviation, which of the three projects would you
recommend to your organization and why?
4.4. Differentiate between Degree of operating leverage (DOL), and Degree of
Financial Leverage (DFL). Clearly explain what each is an indicative of.
TOTAL MARKS
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4
15
4
25
QUESTION 5 (10 MARKS)
REQUIRED:
MARKS
What are the five-C's of credit, and why is it important to consider them when
10
profiling prospective suppliers?
TOTALAMRKS
10
<«END OF QUESTION PAPER»>
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Table 4
Present value interest factor of an (ordinary) annuity of $1 per period at i% for n periods, PVIF A(i,n) = $1 *(1/(1 +i)+ 1/(1+i)1'2+ 1/(1+i)1'3... 1/(1+i)"n).
Period
1%
2%
3%
4%
5%
6%
7%
8%
9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20%
1 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833
2 1.970 1.942 1.913 1.886 1.859 1.833 1.808 1.783 1.759 1.736 1.713 1.690 1.668 1.647 1.626 1.605 1.585 1.566 1.547 1.528
3 2.941
4 3.902
5 4.853
6 5.795
2.884
3.808
4.713
5.601
2.829
3.717
4.580
5.417
2.775
3.630
4.452
5.242
2.723
3.546
4.329
5.076
2.673
3.465
4.212
4.917
2.624
3.387
4.100
4.767
2.577
3.312
3.993
4.623
2.531
3.240
3.890
4.486
2.487
3.170
3.791
4.355
2.444
3.102
3.696
4.231
2.402
3.037
3.605
4.111
2.361
2.974
3.517
3.998
2.322
2.914
3.433
3.889
2.283
2.855
3.352
3.784
2.246
2.798
3.274
3.685
2.210
2.743
3.199
3.589
2.174
2.690
3.127
3.498
2.140
2.639
3.058
3.410
2.106
2.589
2.991
3.326
7 6.728 6.472 6.230 6.002 5.786 5.582 5.389 5.206 5.033 4.868 4.712 4.564 4.423 4.288 4.160 4.039 3.922 3.812 3.706 3.605
8 7.652
9 8.566
10 9.471
7.325
8.162
8.983
7.020
7.786
8.530
6.733
7.435
8.111
6.463
7.108
7.722
6.210
6.802
7.360
5.971
6.515
7.024
5.747
6.247
6.710
5.535 5.335 5.146 4.968 4.799 4.639 4.487 4.344 4.207 4.078 3.954 3.837
5.995 5.759 5.537 5.328 5.132 4.946 4.772 4.607 4.451 4.303 4.163 4.031
6.418 6.145 5.889 5.650 5.426 5.216 5.019 4.833 4.659 4.494 4.339 4.192
11 10.368 9.787 9.253 8.760 8.306 7.887 7.499 7.139 6.805 6.495 6.207 5.938 5.687 5.453 5.234 5.029 4.836 4.656 4.486 4.327
12 11.255 10.575 9.954 9.385 8.863 8.384 7.943 7.536 7.161 6.814 6.492 6.194 5.918 5.660 5.421 5.197 4.988 4.793 4.611 4.439
13 12.134
14 13.004
15 13.865
11.348
12.106
12.849
10.635
11.296
11.938
9.986
10.563
11.118
9.394
9.899
10.380
8.853
9.295
9.712
8.358
8.745
9.108
7.904
8.244
8.559
7.487 7.103 6.750 6.424 6.122 5.842 5.583 5.342 5.118 4.910 4.715 4.533
7.786 7.367 6.982 6.628 6.302 6.002 5.724 5.468 5.229 5.008 4.802 4.611
8.061 7.606 7.191 6.811 6.462 6.142 5.847 5.575 5.324 5.092 4.876 4.675
16 14.718 13.578 12.561 11.652 10.838 10.106 9.447 8.851 8.313 7.824 7.379 6.974 6.604 6.265 5.954 5.668 5.405 5.162 4.938 4.730
17 15.562 14.292 13.166 12.166 11.274 10.477 9.763 9.122 8.544 8.022 7.549 7.120 6.729 6.373 6.047 5.749 5.475 5.222 4.990 4.775
18 16.398 14.992 13.754 12.659 11.690 10.828 10.059 9.372 8.756 8.201 7.702 7.250 6.840 6.467 6.128 5.818 5.534 5.273 5.033 4.812
19 17.226 15.678 14.324 13.134 12.085 11.158 10.336 9.604 8.950 8.365 7.839 7.366 6.938 6.550 6.198 5.877 5.584 5.316 5.070 4.843
20 18.046 16.351 14.877 13.590 12.462 11.470 10.594 9.818 9.129 8.514 7.963 7.469 7.025 6.623 6.259 5.929 5.628 5.353 5.101 4.870
25 22.023 19.523 17.413 15.622 14.094 12.783 11.654 10.675 9.823 9.077 8.422 7.843 7.330 6.873 6.464 6.097 5.766 5.467 5.195 4.948
30 25.808 22.396 19.600 17.292 15.372 13.765 12.409 11.258 10.274 9.427 8.694 8.055 7.496 7.003 6.566 6.177 5.829 5.517 5.235 4.979
35 29.409 24.999 21.487 18.665 16.374 14.498 12.948 11.655 10.567 9.644 8.855 8.176 7.586 7.070 6.617 6.215 5.858 5.539 5.251 4.992
40 32.835 27.355 23.115 19.793 17.159 15.046 13.332 11.925 10.757 9.779 8.951 8.244 7.634 7.105 6.642 6.233 5.871 5.548 5.258 4.997
50 39.196 31.424 25.730 21.482 18.256 15.762 13.801 12.233 10.962 9.915 9.042 8.304 7.675 7.133 6.661 6.246 5.880 5.554 5.262 4.999