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Business-Finance May-Jun 2016 PDF
Business-Finance May-Jun 2016 PDF
2. (a) What is the purpose of the EOQ model? Why may a JIT control system be useful in disclosing
a firm's inefficiencies and problems? 6
(a) The Setu Enterprise orders most of its items in lot sizes of 10 units. Average annual demand per
side of beef is 720 units per year. Ordering costs are Tk.25 per order with an average
purchasing price of Tk. 100 per unit. Annual inventory carrying costs are estimated to be 40%
of the unit cost. 8
Required:
i. Determine the Economic Order Quantity (EOQ).
ii. Determine the annual cost savings if the shop changes from an order size of 10 units to the
Economic Order Quantity.
iii. Since the shelf life is limited, the Setu Enterprise must keep the inventory moving.
Assuming a 360-day year, determine the optimal lot size under each of the following: (1) a
20-day shelf life and (2) a 10-day shelf life.
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6. (a) What is corporate governance? 3
(b) What are the objectives of corporate governance? 4
(c) What is the external audit’s role in corporate governance? 3
8. (a) Does a project that generates a positive internal rate of return also have a positive net present value?
Explain. 4
(b) Nandan Group is considering a proposal to install new machine at a cost of Tk.50,000. The facility
has life expectancy of 5 years and no salvage value. The tax rate is 35%. Assume the firm uses
straight line depreciation and the same is allowed for tax purposes. The estimated cash flows before
depreciation and tax (CFBT) from the investment proposal are as follows:
Year 1 2 3 4 5
CFBT Tk. 10,000 10,692 12,769 13,462 20,385
Should the proposal be accepted? Answer the question by using NPV. 12
Notes:
2014 2013
1. Receivable includes Trade receivables 329.8 285.4
2. Payable includes Trade payables 236.2 210.8
Required:
From the information of the above accounts calculate at least five liquidity and working capital ratios
and make comments thereon. 10
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