FIN2601 Assignment 1 (QUALITY ANSWERS) Semester 1 2024

This document contains workings, explanations and solutions to the FIN2601 Assignment 1 (QUALITY ANSWERS) Semester 1 2024. For assistance call or us on 0.6.8..8.1.2..0.9.3.4........ QUESTION 1 Which one of the following statements articulates the distinction between the capital market and the money market? * 1. 0 2. 0 3. 0 4. The capital market deals with long-term securities, while the money market deals with short-term instruments. The capital market involves borrowing and lending for periods exceeding one year, while the money market involves transactions with maturities of one year or less. The capital market is primarily concerned with government securities, while the money market is concerned with corporate bonds and stocks. The capital market focuses on equity and debt securities for long-term financing, whereas the money market deals with short-term borrowing and lending, typically less than a year. QUESTION 2 Which one of the following statements about sole proprietorships is correct? O 1. The profit of the owner of a sole proprietorship is taxed twice. O2. The owner of a sole proprietorship shares profits as established by the partnership. ® 3' The owner of a sole proprietorship may be forced to sell personal assets to pay company debts. O 4. The owner of a sole proprietorship has limited liability, which guarantees that they cannot lose more than they invested. Clear my choice QUESTION 3 A typical company has diverse shareholders, ranging from individuals holding a few shares to large institutions with significant holdings. To ensure that the priorities and concerns of this varied shareholder base are met, which approach should a financial manager adopt? 0 1. 0 2 0 3' The decisions taken by the financial manager should be solely influenced by the benefit to the company since, by maximising the benefits to the company, he/she will also maximise the benefits of that company's shareholders. The financial manager should consider the interests and concerns of large shareholders a priority so that the needs of those who hold a controlling interest in the company are met. The financial manager should work to maximise the value of the investments of all shareholders. QUESTION 4 The financial metrics for Crystal Globe Travel include a total asset turnover of 1,25, a return on equity (ROE) of 14,30%, and a debt ratio of 15%. With total assets amounting to R3 588 as per the statement of financial position, and considering the financing structure comprising both debt and equity, what is the net profit margin of the company? O 1. 2,34% O 2. 9,72% O 3. 10,28% O 4. 13,16% QUESTION 5 Noyolla Asset Management reports earnings before interest and tax (EBIT) of R12 550. The company's times interest earned ratio is 1,33, the tax rate is 40%, and the debt ratio is 43,1%, with total assets valued at R60 647. What is the company's return on equity (ROE)? O 1. 5,41% O 2. 7,15% O 3. 18,47% O 4. 20,63% QUESTION 6 The Digital Warehouse has an outstanding debt of R580 000 with an interest rate of 9,15%. The company's sales amount to R4 290 000, the tax rate is 40%, and the net profit margin is 3,5%. What is the company’s times interest earned ratio? 1. 1,13 times 2. 4,70 times 3. 5,72 times 4. 7,93 times QUESTION 7 The latest financial statement from Dynamo Analytics reveals a total equity of R, with 5 000 000 ordinary shares outstanding. The market value of each ordinary share is R56, and the company recorded a profit of R for the year. What are the company's (a) price-earnings (P/E) ratio and (b) market-to-book ratio? O 1. (a) 10,00; (b) 2,80 O 2. (a) 2,80; (b) 20,00 O 3. (a) 20,00; (b) 2,80 O 4. (a) 10,00; (b) 5,60. QUESTION 8 Effortless Beauty management has disclosed that the company holds current assets totalling R1 405 000, with a current ratio of 2,7. The cost of goods sold for the company is reported as R3 580 000, and it maintains a quick ratio of 1,0. What is the company's inventory turnover? 0 1. 0,25 times 0 2. 1,09 times 0 3. 4,05 times 0 4. 6,70 times QUESTION 9 How does the difference in savings accounts between Gianna and Hudson change after 30 years, considering that Gianna deposits an additional R5 600 on the first day of each year, Hudson deposits an additional R5 600 on the last day of each year, and both receive an 8% annual return on their savings? O 1. R39 803,04 O 2. R50 750,88 O 3. R63 438,59 O 4. R85136,86 QUESTION 10 The M & T Property Development's acquisition of a plot of land priced at R1 600 000. The company initiated the purchase with a 30% cash down payment and opted to finance the remaining balance. The loan terms mandate monthly payments over a 20-year period, with a compound monthly interest rate of 9,20% per year. What is the monthly mortgage payment? 0 1. R 9 036, 25 0 2. R 10 221,44 0 3. R 25301, 16 0 4. R124 445,56 QUESTION 12 Autumn is considering two insurance settlement offers. The first offer includes annual payments of R7 000, R9 500, and R15 000 over the next three years, respectively. The other offer is the payment of one lump sum amount today. She is trying to decide which offer to accept given the fact that the discount rate is 12%. What is the minimum amount that she will accept today if she is to select the lump sum offer? 0 1. R21 213,15 0 2. R23 387,50 0 3. R24 500,05 0 4. R27 440,62 QUESTION 13 Declan is set to receive R25 000 today from an insurance settlement. Additionally, he anticipates R35 000 one year from today and R10 000 two years from today. Planning to save and invest all of this money for his retirement, if he can achieve an average investment return of 11 %, how much will be in his account when he retires 25 years from today? O 1. R 110 262,67 O 2. R 428 709,48 O 3. R 878 269,75 O 4. R1 209 057,77 QUESTION 14 Sherman Alexander Hemsley established a trust fund that provides R120 000 in scholarships each year for worthy students. The trust fund earns a 5,75% rate of return. How much money did he contribute to the fund, assuming that only the interest income is distributed? O 1. R2 086 956,52 O 2. R2121 212,68 O 3. R2 458 122,40 O 4. R2 637 587,34 QUESTION 15 Today marks Adalynn's retirement. She possesses a total of R411 016 in her retirement savings, with the funds invested to yield an average return of 7,10%, compounded monthly, throughout her retirement. Her plan is to initiate a withdrawal of R2 500 at the beginning of each month, starting today. How much time will elapse until she exhausts her retirement funds? O 1. 16,42 years O 2. 34,56 years O 3. 48,19 years O 4. 50,89 years QUESTION 16 At the outset of buying their new home, the Robinson family secures an R800 000 mortgage from the bank. The bank applies interest at an annual rate of 14%, compounded monthly, with a loan term of 20 years. How much of the outstanding balance on the loan will the family still owe at the conclusion of the first year? O 1. R772 687,39 O 2. R783 083,94 O 3. R792129,68 O 4. R799 385,17 QUESTION 18 Wrenley is purchasing a used car from a local dealer for R112 300. She plans to Not yet make a R20 000 down payment in cash and finance the remaining balance over 36 answered months at an 8,5% interest rate. What will be the amount of each monthly loan Marked out of payment? 1.00 v O 1. R1982,85 © 2. R2275,04 © 3. R6652,12 © 4. R8004,99 QUESTION 19 Zayden will receive an inheritance of R850 000 four years from now. His discount Not yet rate is a 9,2% interest rate, compounded semi-annually. Which of the following answered values is closest to the amount that he should accept today for the right to his Marked out of inheritance? 1.00 v © 1. R516 396,13 © 2. R537 107,60 © 3. R593 151,25 © 4. R597 762,09 QUESTION 20 Annabelle has deposited R4,825 into an account that guarantees a 7,15% interest Not yet rate, compounded quarterly, for the upcoming three years. What will be the total answered amount in her account at the end of this period? Marked out of 1.00 © 1. R1 483,93 © 2. R3 935,73 © 3. R5 968,03 © 4. R7 374,90