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From private investor groups or institutions e.g I.C.D.C, Kenya Industrial Estate (KIE)
etc.
From venture capitalists e.g. Acacia Fund
Commercial banks credit facilities e.g overdrafts and short term loans
From micro-finance institutions e.g. Faulu Kenya, K-Rep, Kenya Women Finance Trust.
Owner?s past savings
Loans from trade associations and cooperative societies including saccos.
Sale of securities to private individuals and groups i.e issue of equity shares, corporate bonds etc.
Leasing of assets from lease firms e.g African Retail Traders (ART).
Kavungya answered the question on April 16, 2021 at 14:48
- In the recent past, the government has been aggressively wooing multinational companies to
come and invest their resources in Kenya.
Analyze the key decision areas that a...(Solved)
In the recent past, the government has been aggressively wooing multinational companies to
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Date posted: April 16, 2021. Answers (1)
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The governments of many less developed countries have experienced problems in recent years as their
debt levels have risen leading to what has been called a “global debt crisis”.
Required:
a) Explain briefly why these problems amount to a “crisis.
b) Discuss the approaches that have been used to overcome the problems.
c) Outline the benefits to multinational business enterprises of resolving the current global debt problems.
Date posted: April 16, 2021. Answers (1)
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risk and are almost identical in all respects...(Solved)
KK Ltd. and KT Ltd. are two companies in the printing industry. The companies have the same business
risk and are almost identical in all respects for their capital structures and total market values. The companies
capital structures are summarized below:
KT‟s ordinary shares are trading at Sh.170 and debentures at Sh.100. Annual earnings
before interest and tax for each company is Sh.50 million.
Corporate tax is at the rate of 30%.
Required:
a) If you owned 4% of the ordinary shares of KT Ltd. and you agreed with the arguments of
Modigliani and Miller, explain what action you would take to improve your financial position.
b) Estimate by how much your financial position is expected to improve. Personal taxes may be
ignored and assumptions made by Modigliani and Miller may be used.
c) If KK Ltd. was to borrow Sh.40 million, compute and explain the effect this would have on the
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Date posted: April 16, 2021. Answers (1)
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cash outflows required will occur in the initial period. The...(Solved)
Gome Drug Products Ltd. (GDPL) is faced with several possible investment projects. For each, the total
cash outflows required will occur in the initial period. The cash outflows, expected net present values and
standard deviations are as follows:
All projects have been discounted at a risk-free rate of 8% and it is assumed that the distribution of
their possible net present values are normal.
Required:
a) construct a risk profile for each of these projects in terms of the profitability index.
b) Ignoring size problems, do you find some projects clearly dominated by others? Should size problem be ignored?
c) What is the probability that each of the projects will have a net present value ≥0
Date posted: April 16, 2021. Answers (1)
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Maendeleo Industries is concerned about interest rates rising. It needs to borrow in the bond market
three months hence. The company believes that an option on treasury bond futures is the best
hedging device.
i) Should the company buy a put option or a call option? Explain.
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both involve premiums of 1½ per cent based on this strike price. During the 3 months,
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Date posted: April 16, 2021. Answers (1)
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Required:
Identify the fundamental distinction between a futures contract and an option on a...(Solved)
Futures contracts and options on futures contracts can be used to modify risk.
Required:
Identify the fundamental distinction between a futures contract and an option on a futures
contract and explain the difference in the manner that futures and options modify portfolio risk.
Date posted: April 16, 2021. Answers (1)
- Jabali Ltd. is a quoted company which is financed by 10,000,000 ordinary shares and Sh.50,000,000 of
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irredeemable 8% debentures. The market value of the shares is Sh.20 each ex-div and an annual dividend of
Sh.4 per share is expected to be paid in perpetuity. The debentures are considered to be risk-free and are
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Mr. Jabali the managing director of the company is wondering whether to invest in a project which cost
Sh.20 million and yield Sh.3.8 million a year before tax in perpetuity. The project has an estimated beta value
of 1.25. The return from a well-diversified market portfolio is 16%.
Required:
a) The weighted average cost of capital of the company.
b) The beta of the company.
c) The beta of an equivalent ungeared company ignoring taxes.
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Date posted: April 16, 2021. Answers (1)
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Company A is considering investing in a project which has a three year life. The project would involve an initial investment of Sh.20 million. The finance manager has come up with expected probabilities for various possible economic conditions as follows:
Required:
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Date posted: April 16, 2021. Answers (1)
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Assume all things are held constant other than the item in question, for each of the
companies below:
A company with a large proportion of insider ownership all of whom are high-income
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Required:
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Date posted: April 16, 2021. Answers (1)
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Date posted: April 16, 2021. Answers (1)
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Highlight the limitations of using commercial paper as a form of short-term credit.
Date posted: April 16, 2021. Answers (1)
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Mr. Kobe is contemplating acquiring Mfalme Flower Company. Incremental cash flows arising from the acquisition are expected to be the following:
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relating its excess returns to that of the market. The risk free rate is 9% and the expected return on
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Required:
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Date posted: April 16, 2021. Answers (1)
- Chuma Company Ltd is considering various levels of debt. Currently it has no debt. It has a total
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Chuma Company Ltd is considering various levels of debt. Currently it has no debt. It has a total
market value of Sh.30 million. By undertaking debt it believes that it can achieve a net tax advantage
equal to 20% of the amount of debt. However the company will incur bankruptcy and agency costs
as well as lenders increasing their interest rate if it borrows too much. The company‟s
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any of these costs. However, each additional Sh.10 million increment in borrowing is expected to
result in the three costs cited being incurred. Moreover, the three costs are expected to increase at
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Required:
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Date posted: April 16, 2021. Answers (1)
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Mr. Mlachake is currently holding a portfolio consisting of shares of four companies quoted on the Bahati Stock Exchange as follows:
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Required:
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Date posted: April 16, 2021. Answers (1)
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Date posted: April 16, 2021. Answers (1)