Biftu Global College

Ay 2015, 2012 Entry, 4th year Business management Regular Program Group Assignment for
Financial Management
Maximum Grade 30% Number of Group member Shall not Exceed 5 students
1. Complete the following financial statements of Omega Company on the
basis of the ratios given below.
Omega Company Income Statement
For the year ended June 30 2001
Sales 2,000,000
Cost of Goods Sold 600,000
Gross Profit 1,400,000
Operating Expenses 1,190,000
Earning Before Interest and Tax -
Debenture Interest 10,000
Income Tax -
Net Profit -
Omega Company Income Statement
For the year ended June 30 2001
Assets Liabilities
Cash - Sundry creditors 60,000
Stocks - 10% Debentures -
Debtors 35,000 Total liabilities -
Total Current Assets - Reserve and Surplus -
Fixed Assets - Share Capital -
Total Assets - Total Liability and Equity -
Additional Information
A. Net Profit to Sale…………….. 5% D. Inventory Turnover..................15
times
B. Current Ratio………………… 1.5 E. Share Capital to Reserve..........4:1
C. Return on Net Worth ……….. 20 % F. Tax Rate…..............................50 %
2. A common stock just paid a dividend of Br 2. The dividend is expected to grow
at 8% for three years, and then it will grow at 4% in perpetuity. What is the stock
worth (super normal growth)?
 3. If a share currently pays Br 1.50 annual dividends, is expected to grow at a rate
of 5% per year and has a required return of 14% what should its share price be?
4. Smith. Inc. has a bond outstanding with 16 Years remaining to maturity, a $
1000 face value, and a coupon rate of 8% paid semiannually. If the current market
price is $ 880, what is the yield to maturity (YTM) on the bonds?
5. Sunshine Construction Company is considering a capital investment for which the
initial outlay is Br 20, 000. Net annual cash inflows (before taxes) are predicted to be
Br 4, 000 for 10 years. Straight- line depreciation is to be used, with an estimated
salvage value of zero. Ignore income taxes. Compute the
A. Pay back period (PBP)
B. Accounting Rate of Return (ARR)
C. Net present Value (NPV) assuming the cost of capital (before tax) of 12 percent;
and
D. Internal rate of return