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Hbf 2302:Advanced Financial Management Question Paper

Hbf 2302:Advanced Financial Management

Course:Bachelor Of Commerce

Institution: Jomo Kenyatta University Of Agriculture And Technology question papers

Exam Year:2015

JOMO KENYATTA UNIVERSITY OF AGRICULTURE AND TECHNOLOGY
UNIVERSITY EXAMINATIONS 2014/2015
THIRD YEAR FIRST SEMESTER EXAMINATIONS FOR THE DEGREE OF
BACHELOR OF COMMERCE

HBF 2302:ADVANCED FINANCIAL MANAGEMENT

DATE:APRIL 2015
TIME:2 HOURS
INSTRUCTIONS:ANSWER QUESTION ONE AND ANY OTHER TWO QUESTIONS

QUESTION ONE
a)Explain three approaches used in establishing a good capital structure.(5 marks)
b)What do you understand by the term "Operating Leverage" how is the
degree of operating leverage measured? (10 marks)
c)XYZ company has an all equity capital structure considering of 100000
ordinary shares of shs. 10 each.The firm wants to raise 250000 to finance
its investments and is considering 2 alternatives methods
(i)Issue 250000 at 10% interest
(ii)To issue 2500 preference shares at shs.100 each at 10% rate of dividend
If the company's earnings before interest and tax (EBIT) after additional investments
are 312500 shillings and a tax rate of 50%.Find the effects of earnings per share(EPS)
under the financing alternatives. (15 marks)

QUESTION TWO
Discuss the following models as used in dividend policy determination
i)Walters model (5 marks)
ii)Gordon's model (5 marks)
iii)Modiglians and Miller's irrelevance theory (5 marks)
iv)The bird in the hand theory (5 marks)

QUESTION THREE
a)Two firms A and B have the following information
Sales shs. '000' V.C. F.C.
Firm A 1800 450 900
Firm B 1500 750 375

Calculate
i)Profit to sales volume (7 marks)
ii)Break even point (7 marks)
iii)Degree of operating leverage in both firms A and B (6 Marks)

QUESTION FOUR
a)Discuss any two inventory management models (10 marks)
b)Discuss any four dangers of over-investment in inventions and four dangers of
under-investment in inventories. (10 marks)

Hbf 2302:Advanced Financial Management Question Paper

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