Financial Management Model Test Paper - 4 (Questions) - CA Intermediate PDF Download

 Page 1


MODEL TEST PAPER 4 
INTERMEDIATE: GROUP – II 
PAPER – 6A : FINANCIAL MANAGEMENT & STRATEGIC MANAGEMENT 
PAPER 6A: FINANCIAL MANAGEMENT 
Time Allowed – 3 Hours (Total time for 6A and 6B) Maximum Marks – 50 
1. The question paper comprises two parts, Part I and Part II.
2. Part I comprises Case Scenario based Multiple Choice Questions (MCQs)
3. Part II comprises questions which require descriptive type answers.
4. Working note should form part of the answer. Wherever necessary, suitable
assumptions may be made by the candidates and disclosed by way of note.
However, in answers to Questions in Division A, working notes are not
required.
PART I – Case Scenario based MCQs (15 Marks) 
Write the most appropriate answer to each of the following multiple choice 
questions by choosing one of the four options given. All questions are 
compulsory. 
Kaivalyabodhi Limited (KbL) has completed 35 years of operations in India. It has 
many subsidiary & associate companies in more than 100 countries. KbL’s 
business s include home and personal care, foods and beverages, and industrial, 
agricultural and other products. It is one of the largest producers of soaps and 
detergents in India. The company has grown organically as well as through 
acquisitions. Over the years, the company has built a diverse portfolio of powerful 
brands, some being household names. 
It is planning to acquire one of its competitors named Prestige Limited, which would 
enhance the growth of ‘KbL’. The consideration amount will be 1.5X of its average 
Market Capitalization. Prestige limited has 1,30,000 outstanding equity shares and 
its shares were traded at an average market price of ` 45 as on the valuation date. 
The consideration amount will be paid equally in 5 years where the first installment 
is to be paid immediately. Prestige Limited has Ko of 15% 
KbL will raise the funds required through debt and equity in the ratio of 30:70. The 
company requires the cost of capital estimates for evaluating its acquisitions, 
investment decisions and the performance of its businesses. 
KbL’s share price has grown from ` 150 to ` 301 in the last 5 years and it will 
continue to grow at the same rate. KbL pays dividends regularly. The company has 
recently paid a dividend of ` 8. For the calculation of equity, an average of 52 weeks 
high market price in the last 5 years is to be considered, which is as follows: 
204
Page 2


MODEL TEST PAPER 4 
INTERMEDIATE: GROUP – II 
PAPER – 6A : FINANCIAL MANAGEMENT & STRATEGIC MANAGEMENT 
PAPER 6A: FINANCIAL MANAGEMENT 
Time Allowed – 3 Hours (Total time for 6A and 6B) Maximum Marks – 50 
1. The question paper comprises two parts, Part I and Part II.
2. Part I comprises Case Scenario based Multiple Choice Questions (MCQs)
3. Part II comprises questions which require descriptive type answers.
4. Working note should form part of the answer. Wherever necessary, suitable
assumptions may be made by the candidates and disclosed by way of note.
However, in answers to Questions in Division A, working notes are not
required.
PART I – Case Scenario based MCQs (15 Marks) 
Write the most appropriate answer to each of the following multiple choice 
questions by choosing one of the four options given. All questions are 
compulsory. 
Kaivalyabodhi Limited (KbL) has completed 35 years of operations in India. It has 
many subsidiary & associate companies in more than 100 countries. KbL’s 
business s include home and personal care, foods and beverages, and industrial, 
agricultural and other products. It is one of the largest producers of soaps and 
detergents in India. The company has grown organically as well as through 
acquisitions. Over the years, the company has built a diverse portfolio of powerful 
brands, some being household names. 
It is planning to acquire one of its competitors named Prestige Limited, which would 
enhance the growth of ‘KbL’. The consideration amount will be 1.5X of its average 
Market Capitalization. Prestige limited has 1,30,000 outstanding equity shares and 
its shares were traded at an average market price of ` 45 as on the valuation date. 
The consideration amount will be paid equally in 5 years where the first installment 
is to be paid immediately. Prestige Limited has Ko of 15% 
KbL will raise the funds required through debt and equity in the ratio of 30:70. The 
company requires the cost of capital estimates for evaluating its acquisitions, 
investment decisions and the performance of its businesses. 
KbL’s share price has grown from ` 150 to ` 301 in the last 5 years and it will 
continue to grow at the same rate. KbL pays dividends regularly. The company has 
recently paid a dividend of ` 8. For the calculation of equity, an average of 52 weeks 
high market price in the last 5 years is to be considered, which is as follows: 
204
Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 
MPS 185 MPS 210 MPS 252 MPS 325 MPS 280 
Ke calculated as per growth model holds a weight of 0.6. 
The company also wishes to calculate the equity’s expectation using CAPM which 
holds a weight of 0.4. The risk-free rate is assumed as the yield on long-term 
government bonds that the company regards as about 8%. KbL regards the market-
risk premium to be equal to 11 per cent. Its estimation on the Beta is 0.78.  
KbL will issue debentures with FV of ` 10,500 which is to be amortised equally over 
the life of 7 years. The company considers the effective rate of interest applicable 
to an ‘AAA’ rated company with a markup of 200 basis points as its coupon rate. It 
thinks that considering the trends over the years, ‘AAA’ rate is 7.5%.  
Ignore taxation. Based on the above details, answer the question 1 to 5: 
1. Calculate the cost of equity under both the methods
(a) 11%, 16%
(b) 18.65%, 10.34%
(c) 18.65%, 16.58%
(d) 16.5%, 9%
2. Calculate the overall cost of equity
(a) 17.82%
(b) 17.63%
(c) 15.37%
(d) 35.25%
3. Calculate the cost of debt, if the intrinsic value of debenture today is close to
` 9,740
(a) 15%
(b) 12%
(c) 9.5%
(d) 7.5%
4. Calculate the WACC & the amount of purchase consideration
(a) 18%, ` 90,00,000
(b) 15.21%, ` 87,75,000
(c) 16.07%, ` 87,75,000
(d) 15.94%, ` 58,50,000
205
Page 3


MODEL TEST PAPER 4 
INTERMEDIATE: GROUP – II 
PAPER – 6A : FINANCIAL MANAGEMENT & STRATEGIC MANAGEMENT 
PAPER 6A: FINANCIAL MANAGEMENT 
Time Allowed – 3 Hours (Total time for 6A and 6B) Maximum Marks – 50 
1. The question paper comprises two parts, Part I and Part II.
2. Part I comprises Case Scenario based Multiple Choice Questions (MCQs)
3. Part II comprises questions which require descriptive type answers.
4. Working note should form part of the answer. Wherever necessary, suitable
assumptions may be made by the candidates and disclosed by way of note.
However, in answers to Questions in Division A, working notes are not
required.
PART I – Case Scenario based MCQs (15 Marks) 
Write the most appropriate answer to each of the following multiple choice 
questions by choosing one of the four options given. All questions are 
compulsory. 
Kaivalyabodhi Limited (KbL) has completed 35 years of operations in India. It has 
many subsidiary & associate companies in more than 100 countries. KbL’s 
business s include home and personal care, foods and beverages, and industrial, 
agricultural and other products. It is one of the largest producers of soaps and 
detergents in India. The company has grown organically as well as through 
acquisitions. Over the years, the company has built a diverse portfolio of powerful 
brands, some being household names. 
It is planning to acquire one of its competitors named Prestige Limited, which would 
enhance the growth of ‘KbL’. The consideration amount will be 1.5X of its average 
Market Capitalization. Prestige limited has 1,30,000 outstanding equity shares and 
its shares were traded at an average market price of ` 45 as on the valuation date. 
The consideration amount will be paid equally in 5 years where the first installment 
is to be paid immediately. Prestige Limited has Ko of 15% 
KbL will raise the funds required through debt and equity in the ratio of 30:70. The 
company requires the cost of capital estimates for evaluating its acquisitions, 
investment decisions and the performance of its businesses. 
KbL’s share price has grown from ` 150 to ` 301 in the last 5 years and it will 
continue to grow at the same rate. KbL pays dividends regularly. The company has 
recently paid a dividend of ` 8. For the calculation of equity, an average of 52 weeks 
high market price in the last 5 years is to be considered, which is as follows: 
204
Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 
MPS 185 MPS 210 MPS 252 MPS 325 MPS 280 
Ke calculated as per growth model holds a weight of 0.6. 
The company also wishes to calculate the equity’s expectation using CAPM which 
holds a weight of 0.4. The risk-free rate is assumed as the yield on long-term 
government bonds that the company regards as about 8%. KbL regards the market-
risk premium to be equal to 11 per cent. Its estimation on the Beta is 0.78.  
KbL will issue debentures with FV of ` 10,500 which is to be amortised equally over 
the life of 7 years. The company considers the effective rate of interest applicable 
to an ‘AAA’ rated company with a markup of 200 basis points as its coupon rate. It 
thinks that considering the trends over the years, ‘AAA’ rate is 7.5%.  
Ignore taxation. Based on the above details, answer the question 1 to 5: 
1. Calculate the cost of equity under both the methods
(a) 11%, 16%
(b) 18.65%, 10.34%
(c) 18.65%, 16.58%
(d) 16.5%, 9%
2. Calculate the overall cost of equity
(a) 17.82%
(b) 17.63%
(c) 15.37%
(d) 35.25%
3. Calculate the cost of debt, if the intrinsic value of debenture today is close to
` 9,740
(a) 15%
(b) 12%
(c) 9.5%
(d) 7.5%
4. Calculate the WACC & the amount of purchase consideration
(a) 18%, ` 90,00,000
(b) 15.21%, ` 87,75,000
(c) 16.07%, ` 87,75,000
(d) 15.94%, ` 58,50,000
205
5. Present Value of Purchase consideration is close to `
(a) 58,83,032
(b) 67,65,487
(c) 57,35,680
(d) 66,58,997 (5 x 2 = 10 Marks) 
6. X ltd has actual Sales of ` 20 lakhs and its Break-even sales are at ` 15 lakhs.
The degree of total risk involved in the company is 6.5. Calculate the % impact
on EPS, if EBIT is affected by 12%.
(a) 40%
(b) 78%
(c) 312%
(d) 19.5% (2 Marks) 
7. Assuming Ke = 11%, Kd = 8% and Ko = 10%, Debt Equity ratio of the company
(a) 2:3
(b) 3:2
(c) 1:2
(d) 2:1 (2 Marks) 
8. Given:
Earnings available to the equity shareholders ` 30 Lakhs,
Cost of equity is 15%,
Debt outstanding ` 150 Lakhs
Value of the firm will be –
(a) ` 200 Lakhs
(b) ` 250 Lakhs
(c) ` 350 Lakhs
(d) ` 300 Lakhs (1 Mark) 
206
Page 4


MODEL TEST PAPER 4 
INTERMEDIATE: GROUP – II 
PAPER – 6A : FINANCIAL MANAGEMENT & STRATEGIC MANAGEMENT 
PAPER 6A: FINANCIAL MANAGEMENT 
Time Allowed – 3 Hours (Total time for 6A and 6B) Maximum Marks – 50 
1. The question paper comprises two parts, Part I and Part II.
2. Part I comprises Case Scenario based Multiple Choice Questions (MCQs)
3. Part II comprises questions which require descriptive type answers.
4. Working note should form part of the answer. Wherever necessary, suitable
assumptions may be made by the candidates and disclosed by way of note.
However, in answers to Questions in Division A, working notes are not
required.
PART I – Case Scenario based MCQs (15 Marks) 
Write the most appropriate answer to each of the following multiple choice 
questions by choosing one of the four options given. All questions are 
compulsory. 
Kaivalyabodhi Limited (KbL) has completed 35 years of operations in India. It has 
many subsidiary & associate companies in more than 100 countries. KbL’s 
business s include home and personal care, foods and beverages, and industrial, 
agricultural and other products. It is one of the largest producers of soaps and 
detergents in India. The company has grown organically as well as through 
acquisitions. Over the years, the company has built a diverse portfolio of powerful 
brands, some being household names. 
It is planning to acquire one of its competitors named Prestige Limited, which would 
enhance the growth of ‘KbL’. The consideration amount will be 1.5X of its average 
Market Capitalization. Prestige limited has 1,30,000 outstanding equity shares and 
its shares were traded at an average market price of ` 45 as on the valuation date. 
The consideration amount will be paid equally in 5 years where the first installment 
is to be paid immediately. Prestige Limited has Ko of 15% 
KbL will raise the funds required through debt and equity in the ratio of 30:70. The 
company requires the cost of capital estimates for evaluating its acquisitions, 
investment decisions and the performance of its businesses. 
KbL’s share price has grown from ` 150 to ` 301 in the last 5 years and it will 
continue to grow at the same rate. KbL pays dividends regularly. The company has 
recently paid a dividend of ` 8. For the calculation of equity, an average of 52 weeks 
high market price in the last 5 years is to be considered, which is as follows: 
204
Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 
MPS 185 MPS 210 MPS 252 MPS 325 MPS 280 
Ke calculated as per growth model holds a weight of 0.6. 
The company also wishes to calculate the equity’s expectation using CAPM which 
holds a weight of 0.4. The risk-free rate is assumed as the yield on long-term 
government bonds that the company regards as about 8%. KbL regards the market-
risk premium to be equal to 11 per cent. Its estimation on the Beta is 0.78.  
KbL will issue debentures with FV of ` 10,500 which is to be amortised equally over 
the life of 7 years. The company considers the effective rate of interest applicable 
to an ‘AAA’ rated company with a markup of 200 basis points as its coupon rate. It 
thinks that considering the trends over the years, ‘AAA’ rate is 7.5%.  
Ignore taxation. Based on the above details, answer the question 1 to 5: 
1. Calculate the cost of equity under both the methods
(a) 11%, 16%
(b) 18.65%, 10.34%
(c) 18.65%, 16.58%
(d) 16.5%, 9%
2. Calculate the overall cost of equity
(a) 17.82%
(b) 17.63%
(c) 15.37%
(d) 35.25%
3. Calculate the cost of debt, if the intrinsic value of debenture today is close to
` 9,740
(a) 15%
(b) 12%
(c) 9.5%
(d) 7.5%
4. Calculate the WACC & the amount of purchase consideration
(a) 18%, ` 90,00,000
(b) 15.21%, ` 87,75,000
(c) 16.07%, ` 87,75,000
(d) 15.94%, ` 58,50,000
205
5. Present Value of Purchase consideration is close to `
(a) 58,83,032
(b) 67,65,487
(c) 57,35,680
(d) 66,58,997 (5 x 2 = 10 Marks) 
6. X ltd has actual Sales of ` 20 lakhs and its Break-even sales are at ` 15 lakhs.
The degree of total risk involved in the company is 6.5. Calculate the % impact
on EPS, if EBIT is affected by 12%.
(a) 40%
(b) 78%
(c) 312%
(d) 19.5% (2 Marks) 
7. Assuming Ke = 11%, Kd = 8% and Ko = 10%, Debt Equity ratio of the company
(a) 2:3
(b) 3:2
(c) 1:2
(d) 2:1 (2 Marks) 
8. Given:
Earnings available to the equity shareholders ` 30 Lakhs,
Cost of equity is 15%,
Debt outstanding ` 150 Lakhs
Value of the firm will be –
(a) ` 200 Lakhs
(b) ` 250 Lakhs
(c) ` 350 Lakhs
(d) ` 300 Lakhs (1 Mark) 
206
PART II – Descriptive Questions (35 Marks) 
Question No. 1 is compulsory. 
Attempt any two questions out of the remaining three questions. 
1. (a)  You are required to CALCULATE the Total Current Assets of Ananya
Limited from the given information: 
Stock Turnover = 5 times 
Sales (All credit) = ` 7,20,000 
Gross Profit Ratio = 25% 
Current Liabilities = 2,40,000 
Liquidity Ratio = 1.25 
Stock at the end is ` 30,000 more than stock in the beginning. 
(5 Marks) 
(b) Gitarth Limited has a current debt equity ratio of 3:7. The company is
presently considering several alternative investment proposals costing
less than ` 25 lakhs. The company will always raise the funds required
without disturbing its current capital structure ratio.
The cost of raising debt and equity are as follows-
Cost of Project Kd Ke 
Upto 5 lakhs 10% 12% 
Above 5 lakhs & upto 10 lakhs 12% 13.5% 
Above 10 lakhs & upto 20 lakhs 13% 15% 
Above 20 lakhs 14% 16% 
Corporate tax rate is 30%, CALCULATE: 
i) Cut off rate for two Projects I & Project II whose fund requirements
are 15 lakhs & ` 26 lakhs respectively.
ii) If a project is expected to give an after-tax return of 13%, determine
under what conditions it would be acceptable.     (5 Marks)
(c) From the following details of X Ltd, PREPARE the Income Statement for
the year ended 31
st
 December:
Financial Leverage 2 
Interest  ` 2,000 
Operating Leverage 3 
Variable Cost as a Percentage of Sales 75% 
Income Tax Rate 30% 
 (5 Marks) 
207
Page 5


MODEL TEST PAPER 4 
INTERMEDIATE: GROUP – II 
PAPER – 6A : FINANCIAL MANAGEMENT & STRATEGIC MANAGEMENT 
PAPER 6A: FINANCIAL MANAGEMENT 
Time Allowed – 3 Hours (Total time for 6A and 6B) Maximum Marks – 50 
1. The question paper comprises two parts, Part I and Part II.
2. Part I comprises Case Scenario based Multiple Choice Questions (MCQs)
3. Part II comprises questions which require descriptive type answers.
4. Working note should form part of the answer. Wherever necessary, suitable
assumptions may be made by the candidates and disclosed by way of note.
However, in answers to Questions in Division A, working notes are not
required.
PART I – Case Scenario based MCQs (15 Marks) 
Write the most appropriate answer to each of the following multiple choice 
questions by choosing one of the four options given. All questions are 
compulsory. 
Kaivalyabodhi Limited (KbL) has completed 35 years of operations in India. It has 
many subsidiary & associate companies in more than 100 countries. KbL’s 
business s include home and personal care, foods and beverages, and industrial, 
agricultural and other products. It is one of the largest producers of soaps and 
detergents in India. The company has grown organically as well as through 
acquisitions. Over the years, the company has built a diverse portfolio of powerful 
brands, some being household names. 
It is planning to acquire one of its competitors named Prestige Limited, which would 
enhance the growth of ‘KbL’. The consideration amount will be 1.5X of its average 
Market Capitalization. Prestige limited has 1,30,000 outstanding equity shares and 
its shares were traded at an average market price of ` 45 as on the valuation date. 
The consideration amount will be paid equally in 5 years where the first installment 
is to be paid immediately. Prestige Limited has Ko of 15% 
KbL will raise the funds required through debt and equity in the ratio of 30:70. The 
company requires the cost of capital estimates for evaluating its acquisitions, 
investment decisions and the performance of its businesses. 
KbL’s share price has grown from ` 150 to ` 301 in the last 5 years and it will 
continue to grow at the same rate. KbL pays dividends regularly. The company has 
recently paid a dividend of ` 8. For the calculation of equity, an average of 52 weeks 
high market price in the last 5 years is to be considered, which is as follows: 
204
Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 
MPS 185 MPS 210 MPS 252 MPS 325 MPS 280 
Ke calculated as per growth model holds a weight of 0.6. 
The company also wishes to calculate the equity’s expectation using CAPM which 
holds a weight of 0.4. The risk-free rate is assumed as the yield on long-term 
government bonds that the company regards as about 8%. KbL regards the market-
risk premium to be equal to 11 per cent. Its estimation on the Beta is 0.78.  
KbL will issue debentures with FV of ` 10,500 which is to be amortised equally over 
the life of 7 years. The company considers the effective rate of interest applicable 
to an ‘AAA’ rated company with a markup of 200 basis points as its coupon rate. It 
thinks that considering the trends over the years, ‘AAA’ rate is 7.5%.  
Ignore taxation. Based on the above details, answer the question 1 to 5: 
1. Calculate the cost of equity under both the methods
(a) 11%, 16%
(b) 18.65%, 10.34%
(c) 18.65%, 16.58%
(d) 16.5%, 9%
2. Calculate the overall cost of equity
(a) 17.82%
(b) 17.63%
(c) 15.37%
(d) 35.25%
3. Calculate the cost of debt, if the intrinsic value of debenture today is close to
` 9,740
(a) 15%
(b) 12%
(c) 9.5%
(d) 7.5%
4. Calculate the WACC & the amount of purchase consideration
(a) 18%, ` 90,00,000
(b) 15.21%, ` 87,75,000
(c) 16.07%, ` 87,75,000
(d) 15.94%, ` 58,50,000
205
5. Present Value of Purchase consideration is close to `
(a) 58,83,032
(b) 67,65,487
(c) 57,35,680
(d) 66,58,997 (5 x 2 = 10 Marks) 
6. X ltd has actual Sales of ` 20 lakhs and its Break-even sales are at ` 15 lakhs.
The degree of total risk involved in the company is 6.5. Calculate the % impact
on EPS, if EBIT is affected by 12%.
(a) 40%
(b) 78%
(c) 312%
(d) 19.5% (2 Marks) 
7. Assuming Ke = 11%, Kd = 8% and Ko = 10%, Debt Equity ratio of the company
(a) 2:3
(b) 3:2
(c) 1:2
(d) 2:1 (2 Marks) 
8. Given:
Earnings available to the equity shareholders ` 30 Lakhs,
Cost of equity is 15%,
Debt outstanding ` 150 Lakhs
Value of the firm will be –
(a) ` 200 Lakhs
(b) ` 250 Lakhs
(c) ` 350 Lakhs
(d) ` 300 Lakhs (1 Mark) 
206
PART II – Descriptive Questions (35 Marks) 
Question No. 1 is compulsory. 
Attempt any two questions out of the remaining three questions. 
1. (a)  You are required to CALCULATE the Total Current Assets of Ananya
Limited from the given information: 
Stock Turnover = 5 times 
Sales (All credit) = ` 7,20,000 
Gross Profit Ratio = 25% 
Current Liabilities = 2,40,000 
Liquidity Ratio = 1.25 
Stock at the end is ` 30,000 more than stock in the beginning. 
(5 Marks) 
(b) Gitarth Limited has a current debt equity ratio of 3:7. The company is
presently considering several alternative investment proposals costing
less than ` 25 lakhs. The company will always raise the funds required
without disturbing its current capital structure ratio.
The cost of raising debt and equity are as follows-
Cost of Project Kd Ke 
Upto 5 lakhs 10% 12% 
Above 5 lakhs & upto 10 lakhs 12% 13.5% 
Above 10 lakhs & upto 20 lakhs 13% 15% 
Above 20 lakhs 14% 16% 
Corporate tax rate is 30%, CALCULATE: 
i) Cut off rate for two Projects I & Project II whose fund requirements
are 15 lakhs & ` 26 lakhs respectively.
ii) If a project is expected to give an after-tax return of 13%, determine
under what conditions it would be acceptable.     (5 Marks)
(c) From the following details of X Ltd, PREPARE the Income Statement for
the year ended 31
st
 December:
Financial Leverage 2 
Interest  ` 2,000 
Operating Leverage 3 
Variable Cost as a Percentage of Sales 75% 
Income Tax Rate 30% 
 (5 Marks) 
207
2. (a) The financial statements of Gurunath Ltd is furnished below –
Balance Sheet as at 31
st
 March 
Particulars as at 31
st
 March Note ` 
I EQUITY AND LIABILITIES: 
(1) Shareholders’ Funds: 10,00,000 
(2) Non–Current Liabilities: 10% Debt 6,00,000 
(3) Current Liabilities 1,56,000 
Total 17,56,000 
II ASSETS 
(1) Non–Current Assets 16,56,000 
(2) Current Assets – Trade Receivables 1,00,000 
Total 17,56,000 
Additional Information: 
1. The existing credit terms are 1/10, net 45 days and average
collection period is 30 days. The current bad debts loss is 1.5%. In
order to accelerate the collection process further as also to
increase sales, the company is contemplating liberalization of its
existing credit terms to 2/10, net 45 days.
2. It is expected that sales are likely to increase by 1/3 of existing
sales, bad debts increase to 2% of sales and average collection
period to decline to 20 days.
3. Credit period allowed by the supplier is 60 days. Generally,
operating expenses are paid 2 months in arrears. Total Variable
expenses of the company constitute Purchases of stock in trade
and operating expenses only.
4. Opportunity cost of investment in receivables is 15%. 50% and 80%
of customers in terms of sales revenue are expected to avail cash
discount under existing and liberalization scheme respectively. The
tax rate is 30%.
5. The Company considers only the relevant or variable costs for
calculating the opportunity costs on the funds blocked in
receivables. Assume 360 days in a year and 30 days in a month.
Should the company change its credit terms? (6 Marks)
(b) The following information is given for QB Ltd.
Earnings per share ` 180 
Dividend per share ` 45 
Cost of capital 17% 
Internal Rate of Return on investment 20% 
CALCULATE the market price per share using - 
(a) Gordon’s formula
208