Business Finance I

FINC 2101 / 303

Fall 2022

Assignment 1

Assignment rules:

1) All your answers, discussions, interpretations should be detailed by

your own words (coping and pasting is prohibited).

2) No Emails/Questions on the assignment during the assignment

period. If you doubt in a question, you are invited to write your concern

in the answer sheet.

3) The due date of this assignment is Monday 3rd oct 2022 at 11:59

PM. Each minute of delay will affect the grade.

4) Assignments to be submitted to Blackboard and the file should be

named with the student’s name and University ID.

1. ABC Company sells Desks to various Firms. The company policy is to sell 60% cash and
the rest in a form of accounts receivables to be collected after 2 months, the cost should
be paid 70% cash and the rest in a form of accounts payables to be paid after 3 months.
Assuming that the company sales increase by 20% monthly and its COGS increases by
7% monthly. The required is to
a. Fill the table.
b. Explain having negative cash flow while the company is making profits?

Month Jan. Feb. March April May

Sales $300,000
COGS $250,000
Cash inflow
Cash Outflow
Accounting Net
Profit/Loss
NCF

2. An analyst has been asked to evaluate a proposal. The manager of the Advertising
division believes that replacing the printers used on one of the business production lines
will produce total benefits of $900,000 (in today’s dollars) over the next 5 years. The
existing printers would produce benefits of $750,000 (also in today’s dollars) over that
same time period. An initial cash investment of $400,000 would be required to install the
new equipment. The manager estimates that the existing printers can be sold for
$230,000. Using marginal cost–benefit analysis techniques, determine the following:
a. The marginal (added) benefits of the proposed new printers.
b. The marginal (added) cost of the proposed new printers
c. The net benefit of the proposed new printers.
d. What should the Analyst recommend that the company do? Why?

3. Graph the flow of funds through the financial system using your own graph and explain it
briefly.