CONFIDENTIAL AC/NOV 2017/MAF253

UNIVERSITI TEKNOLOGI MARA

COMMON TEST 1
SUGGESTED SOLUTION

COURSE FUNDAMENTAL FINANCIAL MANAGEMENT

COURSE CODE MAF253
EXAMINATION NOVEMBER 2017

© Hak Cipta Universitl Teknologl MARA CONFIDENTIAL

 CONFIDENTIAL 2 AC/NOV 2017/MAF253

PART A

tci: B
I�: I�: I�:
:3
D
B
D B
p B .
A
D I 510. 8
A D
B 8 C
(J
i3,
C (Total: 10 marks)
PARTS

SOLUTION 1

A. TWO (2) major differences between:

Stock Price Maximization Profit Maximization
deals with all the complexities of the ignores all the complexities when
operating environmentv making financial decisions,/
apply the principle of time value of Does not consider the timing of the
moneyv returnsv
(4v x 1 mark= 4 marks)

a.
B.
. Financial markets provides placel/ which suppliers and demanders of loans and
investments can transact business directly. v
Financial markets perform the function of a/locating savings in the economy to
the ultimate demanders of the savings.v
(3v x 1 mark = 3 marks)

THREE (3) characteristics of money market:

b.
• Deals with short-term securities.v
• There is no 'physical' money market. Instead, it is an informal networks of
banks and traders linked by telephone and computers.v
• Money market offers low but steady returns.v
=-===-----��-=�== �=�=--�-�-�-(3-,u_i.mark--=-.3 mark�
(Total: 10 marks)
�-----

SOLUTION 2

a.

Non-current assets 4,500,000v

Permanent current assets (1,700,000 - 425,000) 1,275,000v'
5,775,000
Temporary current assets (1/4 x 1,700,000) 425,000v
6,200,000

Permanent sources of financing (4,500,000 + 1,275,000 + (1/4 x 425,000) 5,881,250-vv'

Temporary sources of financing 318,750v
6,200.000
(6v x ½ mark - -J" marks)

pA = N C I\ t. 'll CA ✓ ✓
,--. ,,:, , 0.-U � \ '.l-1<; C\..-12) ·: S /
-- 4 ,;;;,v~ :J.:\
S OU�
'
'-:.J I I

TA :: / -r-1
lf l11-c"101 CO = <l'?..:;; 1
cuo ✓
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f<; ;::: 41 � k© 111-1--s- ll ® �<,. vn.. t,·) :.- �, £--s-1, 2so ✓/

·1� - ;/l\ (..'4-'lt:;°,cu.>J; 3\�,l�u /
 CONFIDENTIAL 3 AC/NOV 2017/MAF253

b.
EBIT 600,000,f
(-) Interest:
Short term 318,750 X 4% 12,750-./v',
Long term 5,881,250 X 8% 470,500\NI (483,250)
EBT 116,750
(-) Tax 116,750 X 24%'1/ (28,020)' /
Net Profit 88,730
(6v x ½ mark = 3 marks)

c. The company adopt conservative approach'\/ in financing its assets as it is using

RM106,250 of permanent sources of financing to finance its temporary assets.v
(2v x 1 mark = 2 marks)

d. RM
Temporary assets RM425,oo0
Temporary
Sources
RM318,750€)

Permanent current assets RM1 ,275,00CXV

Permanent Permanent sources

asset RMS,881,25�
RM5.77M
Non-current assets RM4,500,00€J \
1
Time period \

(6v x ½ mark = 3 marks)

(Total: 11 marks)

SOLUTION 3

A ·>
>
i. CCC (old) = (360/6) v + 45 v-30 v = 75 days ./'J./ 3
ii. CCC (new) = (60...:. 6v) + (45 - 9v) - (30 + 10v) = 50 days .///
iii. Annual interest saving :.: (RM4,500,000v/360v) x (75j sov) x 10¾v / G
7
= RM31,250v -I'✓

./ (12v x ½ mark = 6 marks)

B. Secured loans are backed by the pledge of specific assets. v

Unsecured loans are only backed by the promise of the borrower to honor the loan
commitment. v
(2v x 1 mark = 2 marks)

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CONFIDENTIAL 4 AC/NOV 2017/MAF253

C.

100,000 = Bv-0.1Bv ✓✓ ( •.2.-)

B =
I

RM111, 111.11

EAR (111,111.11v x o. osv x 6/1211) I 1oo, ooov x 12/6v

= 5.56%
Jnhi-c-Jt- o o.\.-x 111 111 .q ,.._,&_ (7vx1 mark=7marks)
,
D. - 8,1-:::i'"l--:f�·✓/✓
tA � .: :i 1 '.)::n- -J.s:- i� c- /
a. = 0.02 V_ X _J_§Q_v --J...-
1 - 0.02v 30-1Qv \VO OJD � = 5-� f..
t.
, ✓ ✓
= 36.73%

b. = 0.02 11 x 360 v
1 - 0.0211 55-15v
= 18.34%
(811 x ½ mark = 4 marks)

END OF SUGGESTED SOLUTION

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