Financial Management 1 (FINM3101)
Faculty of Economics and Management Science (FEMS)
Semester: First Semester
Level: 300
Year: 2017
Exercise one: 12marks.
A company with 6,000 shares in issue has announced a new issue of shares by a right issue.
The current market price of the shares just before the issue stands at 30,000CFA. The shares
will be issued at a discount of 30% and the shareholders have decided to make a one for three
right issue.
Require:
a) Determine the rights issue price.
b) Determine the theoretical ex-right price.
c) Determine the value of a right.
d) A shareholder of 300 shares decides to forfeit his rights and to sell them for cash. Show the
effect of this action on his financial and shareholding situation.
Exercise two: 6marks.
ABC Plc. Made profits before tax in 3016 of 93,200,000CFA. The income tax is 33%. The
company’s share capital is as follows:
Ordinary shares (10,000 share of 10,000FCFA) 100,000,000FCFA
8% preference shares 20,000,000FCFA
120,000,000FCFA
Required:
Given that 25% of annual earnings shall be retained, calculate the EPS and DPS for 2016
Exercise three: 12 marks
The following elements are extracted from the financial records of ABC Corporation for the
year ended December 31, 2016
- Total revenues: 100,000,000FCFA
- Cost of goods sold: 40,000,000FCFA
- Operating expenses;
Rents: 12,000,000FCAF
Salaries: 13,000,000 FCAF
THE UNIVERSITY OF BAMENDA
FACULTY OF ECONOMICS AND MANAGEMENT SCIENCES
1
st
Semester C.A Course: Financial Management
Credit Value:
Course Lecturers:
Time: Course Status: Date:
Venue: Instruction:
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Utilities; 5,000,000 FCAF
Depreciation: 8,000,000 FCAF
- Financial expenses:
2% on total sales of 35,040,000 FCAF for the period.
Loan interest; 4,500,000 FCAF
- Income tax rate: 33%
- The company’s share capital structure is as follows:
Ordinary shares (10,000 share of 10,000FCFA) 100,000,000FCFA
8% preference shares 20,000,000FCFA
120,000,000FCFA
Required:
a) Compute the net earnings for the financial year ended December 31, 2016.
b) Compute the EPS, the total dividends payable and DPS for ABC Corporation for the financial
year ended December 31, 2016, given that the retention ratio is 60%.
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