AIMST UNIVERSITY

FACULTY OF BUSINESS AND MANAGEMENT

PRINCIPLES OF CORPORATE FINANCE

Tutorial 1

1. Discuss briefly three vital aspects of Finance. Give an example of decision made under those aspects.

2. Describe the term ‘Liquidity’. Give one example of both liquid and illiquid assets.

3. Explain the reasons with relevant examples on why there are differences between accounting income
and cash flow.

4. With relevant examples, distinguished between ‘Market value’ and ‘Book value’.

5. Describe briefly on ‘Average and marginal tax rates.

6. Bigshop Inc., has current assets of RM5,100, net fixed assets of RM23,800, current
liabilities of RM4,300 and long term debt of RM7,400. What is the value of the shareholder’s equity for the
firm? How much is the net working capital?

7. Mitula Manufacturing has sales of RM596,000, costs of RM242,000, depreciation expense of RM41,500,
interest expense of RM28,000 and a tax rate of 35 percent.

(a) What is the net income for the firm?

(b) Suppose the firm paid out RM73, 000 in cash dividends. Find the addition to retained earning?
(c) Suppose the firm has 85,000 shares of common stock outstanding? Compute the earnings per share
(EPS) and dividend per share (DPS)?

8. NYZ Computer Manufacturing has sales of RM29,500, costs of RM12,280, depreciation expense of
RM2,100 and interest expense of RM1,105. If the tax rate is 35 percent, find the operating cash flow or
OCF?

9. A&T Driving School’s 2016 statement of financial position showed net fixed assets of RM3.8 million and
the 2017 statement of financial position showed net fixed assets of RM5.2 million. The company income
statement showed a depreciation expense of RM392,000. Compute the net capital spending for 2017?

10. The 2017 statement of financial position of PERMATA Sdn. Bhd. showed current assets of RM2,800 and
current liabilities of RM1,380. The 2018 statement of financial position showed current assets of RM2,350
and current liabilities of RM1,810. What was the company’s 2018 change in net working capital or NWC?

11. The 2015 statement of financial position of J&K Sportwares Sdn Bhd., showed long-term debt of RM2.8
million and the 2016 statement of financial position showed long-term debt of RM3.3 million. The 2016
income statement showed an interest expense of RM170,000. What was the firm’s cashflow to creditors
during 2016?

12. The 2017 statement of financial position of P&B Sportwares Sdn Bhd., showed RM740,000 in the
common stock’s account and RM5.2 million in the additional paid-in surplus account. The 2018 statement
of financial position showed RM815,000 and RM5.5 million in the same two accounts, respectively. If the
company paid out RM490,000 in cash dividends during 2018, what was the cash flow to stockholders for
the year?