Financial Management

Assignment 02

Course Instructor: Kassu

1. 3.XYZ Inc. is considering buying a machine costing $100,000. There are two
options Machine A and Machine B. Machine A will generate net cash inflow of $
50,000, $ 50,000 & $ 20,000 in year 1, year 2 & year 3 respectively. Machine B
will generate net cash inflow of $ 30,000, $ 40,000 & $ 80,000 in year 1, year 2 &
year 3 respectively. (10 Marks)
Required:
A. Determine the payback period of the two projects and based on the result of
your calculation which project should have to be accepted.
B. Determine the discounted payback period of the two projects and based on the
result of your calculation which project should have to be accepted. (Assume
the market interest rate is 10%)
C. Determine the Net present value of the two projects and based on the result of
your calculation which project should have to be accepted. (Assume the
market interest rate is 10%)
D. From the given investment proposal evaluation techniques which on is better?
Why?

2. The following information is taken from ABC company:

2013 2012
✔ Account receivable…… 12,250 17,750
✔ Inventory …………….. 7,000 5,000
✔ Account payable ……… 4,000 3,500
In addition to the above data, Credit sales for the year just ended were birr 60,000, and
cost of goods sold was birr 30,000. Additional credit purchase of the year is 37,500 (use
360 for number of days in a year) (10 marks)
Required:
A. Inventory period
B. Payable period
C. Receivable period
 D. Operating cycle
E. Cash conversion cycle
F. Put your opinion towards the result.

3. List and clearly discuss determinants of capital structure and Dividend decision (5
marks)25

● Submissions should be made on your LMS only.

● File name should contain your name and your ID No.
● For any Questions about the assignment, you can use this link and forward me
your questions via message.