AMOUDUNIVERSITY

Faculty of Business and Public Administration

Mid Term Examinations

Course: Business Finance Year of study: 1st (junior)

Semester of Study: 1stSemester Academic Semester: 2020/2021

THIS PAPER CARIES 20 MARKS IN TOTAL

Instructions to candidates Time Allowed: 1Hr 30Mins

This paper contains Three parts.
Part 1 contains 10 Marks, Part 2 Carries 6 Marks while Part 3 Carries 4 marks.
Question one is Compulsory. Attempt any three questions in part II and any question in part
III.

Part One [10 marks] Compulsory Question (Answer ALL questions)

1. What is the role of business finance?

........................................................................................................................................................
........................................................................................................................................................
........................................................................................................................................................

2. Are investment where if you accept investment A, you must also accept investment B,
they go together. Which investment is referring?
A. Mutually exclusive
B. Independence projects
C. Contingent investment

3. What are the investment decision rule?

1. __________________________________________________________________
2. __________________________________________________________________
3. __________________________________________________________________
4. __________________________________________________________________
5. __________________________________________________________________

4. In what order do basic forms of business organization typically perform?

A. Sole proprietorship, Corporation, Partnership
B. Partnership, Sole proprietorship, Corporation
C. Sole proprietorship, Partnership, Corporation

1
 5. List the general area of finance?
1. __________________
2. __________________
3. __________________

6. What are the examples of Annuities?

……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………

7. Define business finance?

........................................................................................................................................................
........................................................................................................................................................
........................................................................................................................................................

8. What are the advantages of net present value?

……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………

9. List the process of capital budgeting?

a. __________________________________
b. __________________________________
c. __________________________________
d. __________________________________

10. Why finance is necessary to business?

........................................................................................................................................................
........................................................................................................................................................
........................................................................................................................................................
........................................................................................................................................................

Part Two-(Answer only (3) questions) 6 marks

1. The initial cash outlay over the project is $100,000 and it can generate cash flow of
$60,000, $40,000, $20,000 and $30,000 in year. Assume 10% rate of discount. What is
the profitability index?
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………
2
 ……………………………………………………………………………………………………
……………………………………………………………………………………………………

2. An industry is considering investment in a project with cost $600,000 cash inflows are
$120,000, $140,000, $180,000, $200,000, $250,000. Calculate payback period?
........................................................................................................................................................
........................................................................................................................................................
........................................................................................................................................................
........................................................................................................................................................
........................................................................................................................................................
........................................................................................................................................................
........................................................................................................................................................
........................................................................................................................................................
........................................................................................................................................................
........................................................................................................................................................
........................................................................................................................................................
........................................................................................................................................................

3. A project cost $ 10,000 and is required to generate cashflows of $2500, $4000, and
$5000, $3000, $1000. Assume that hurdle rate is 6%. Calculate the net present value?
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………

4. What is the future value of $100 if interest is compounded annually at rate of 8% for
five years?
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………

3
Question Three –Each Question Carries 4 marks (Answer only 1 Question in Part III)

1. What are the financial objectives? (4mrks)

........................................................................................................................................................
........................................................................................................................................................
............................................................................................... ........................................................
........................................................................................................................................................
........................................................................................................................................................
............................................................................................... ........................................................
........................................................................................................................................................
........................................................................................................................................................
............................................................................................... ........................................................
........................................................................................................................................................
........................................................................................................................................................
............................................................................................... ........................................................
........................................................................................................................................................

2. How much will accumulate in an account with an initial deposit of $10,000 which
earn 5% interest compounded quarterly for three years? (4mrks)
........................................................................................................................................................
........................................................................................................................................................
............................................................................................... ........................................................
........................................................................................................................................................
........................................................................................................................................................
............................................................................................... ........................................................
........................................................................................................................................................
........................................................................................................................................................
............................................................................................... ........................................................
........................................................................................................................................................
........................................................................................................................................................
............................................................................................... ........................................................
........................................................................................................................................................
........................................................................................................................................................