FIN2603 SEM 1 EXAM EXPECTED QUESTIONS AND SOLUTIONS

Ques on 1

Calculate the present value (PV) of R100 000 received nine years from today at an interest rate
of 12%. Interest is compounded monthly.
Answer:

 b. R34 142



Ques on 2

Calculate the growth rate of the following stream of cash flows:
YEAR CASH FLOW
2023 R 4 600
2022 R 3 000
2021 R 1 900
2020 R 1 800
Answer:

 a. 37%



Ques on 3

A company increasing its credit terms for customers from 2/15 net 60 to 2/20 net 90 will likely
experience ...
Answer:

 d. an increase in the average collec on period.



Ques on 4

How much should Conner invest today at 9% interest per annum, compounded quarterly, to be
able to buy a house worth R2 500 000 six years from today?
Answer:

 d. R1 465 616.71



Ques on 5

, A firm can best improve its return on equity (ROE) by increasing the ...
Answer:

 b. net profit margin, asset turnover and financial leverage.



Ques on 6

The cost of giving up a cash discount under the terms of sale 4/10 net 30 is ... (Assume a 360-
day year)
Answer:

 d. 55.67%



Ques on 7

A firm with a cash conversion cycle of 50 days can stretch its average payment period from 15
days to 30 days. This will result in a/an ...
Answer:

 d. increase of 15 days in the cash conversion cycle.



Ques on 8

Find the present value of the following stream of cash flows by assuming that the organisa on
has an opportunity cost of 11%.
Years 1–3: R25 000
Years 4–7: R50 000
Answer:

 c. R155 268.41



Ques on 9

During periods where the consumer price index (CPI) is expected to increase, a retail firm will
have to ...
Answer:

 a. budget more conserva vely as a result of rising interest rates, a decline in sales and
an increase in bad debts.