1. a) The Management of GC Ltd. has proposed to invest Ksh. 100,000 in a project which will give earnings for 6 years as follows;
Year 1 2 3 4 5 5
Saving 30,000 20,000 20,000 18,000 18,000 12,000
Calculate pay-back period. (5. marks)
b) Explain various types of cost of capital. (5 marks)
2. a) X Ltd. Has 10% irredeemable debentures of Ksh 100,000.Par value of debentures is Ksh 100.Find out the cost capital, if debentures have been issued
(i) at par
(ii) at discount of 10%
(iii) at a premium of 10% (5 marks)
b) What are the limitations of ratio analysis. (5 marks)
3. Current Assets of a company are Ksh. 500,000. Its Current ratio is 2.5 : 1 and quick ratio is 1:1.Calculate the value of current liabilities, liquid asaets and stock.
(5 marks
b) Explain the irrelevance evidence of divident decisions. ( 5 marks)
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