KOHAT UNIVERSITY OF SCIENCE & TECHNOLOGY.

Kohat 26000, Khyber Pukhtun Khwah, Pakistan. Ph # 0922-554563-554565

Mid Term Exam (Business Finanace)

28th May 2021

Time allowed: 24hrs Max Marks: 30

Start time 9am 28-05-2021

Submission time till 9 pm 28-05- 2021

INSTRUCTIONS:

1) The Answer sheets must be handwritten. Your Name, Registration number, Program and Semester
MUST be clearly written on your handwritten answer sheet.
2) After solving the paper, student is required to follow three steps, (1): Clearly scan it, (2): then convert
it into PDF, (3): upload on KCMS. In case of any technical issue with KCMS account, submit your answer
sheet through registered email (onlineexam.kust@gmail.com)to not later than 12 hours.
3) Important Note: Solved hand written answer sheet must be submitted within 24 hours after which it
will not be accepted.
4) Keep your handwritten answer sheet with yourself as you will also be required to submit it to your
teacher.

Q1: a) In the past few years, there has been substantial increase in the role of finance manager”, give
your comments. Also explain in detail the role of finance manager in present day business
enterprises.`` (Marks 5.)

b) Wealth maximization objective is superior to the profit maximization‘- explain (Marks 5.)

Q2 a) A portfolio comprises two securities and the expected return on them is 12% and
16% respectively. Determine return of portfolio if first security constitutes 40% of
total portfolio (marks 2.5)

b) What is the expected return for the following stock? (State your answer in percent with one decimal
place.) (marks 2.5)

Outcomes Possible returns Probability

Better 32% 0.50

 Same 17% 0.20

Worse -10% 0.30

c) Explain the shifts in the SML caused by changes in inflationary expectations and risk aversion. (marks 5)

Q3 a) Determine on which date firm discount period and credit period ends for the purchases made and
invoices date 25 Nov under each of the following credit terms. .i)net 60 EOM, ii) net 30 date of
invoice. (marks 2)

b) Calculate the cost of giving up discount under following terms (marks 2)

i) 3/10 net 40

ii) 5/15 eom 55

c) Garrett industries turn over its inventory 6 times each year; It has an average collection period of 45
days and an average payment period of 30 days. The firm’s annual operating cycle investment is
$ 3 million. Assume 360 day year Calculate (marks 6)

a. firm’s operating cycle,

b. cash conversion cycle,
c. its daily cash operating expenditure,
d. the amount of resources needed to support its CCC.