fon, et, ¥ ; é g ge ah! SECTION A, Aten a qxestons 2000 QUESTION 1: ANSWER BY TRUE OR FALSE Amari each, 4. Supply refers to the quantity of goods or services @ producer is willing to Supply at ex, Sap eer he gum of ptr ris Sne lin ace emntea al b. The basic economic principles include scarcity, ‘oely and. deaiad: ‘marginal costs, Bane ; Ta aod SSP yc gd ca Th won oe aS end se some optimal level of eapacty is reached, adding an additioral factor of production will celts ae eee oes aan rake ne otras mics cane ta eiing ioe ec gee QUESTION 2; ANSWER BY YES OR NO mark each a. Tax isa voluntarily contribution to state revenue, levied by the government on workers’ income and business roi, or added to the vost of some goods, services, and transactions. b. Calculating the intemal rte of retum takes drlat/and error when solving with software, because you are trying to find a rate at which the net present value (NPV) of future cash flows is zero c. Some equipment doesn’t depreciate 4. The most common methods used for financial sttement analysis are trend analysis, common-size statements, and ratio analysis. €. Non-manufacturing costs are those that are dirty related to the creation of the product itself while direct manufacturing costs ae the indirect expenses that aren’t directly related to making a specific product or providing a particular service, QUESTION 3: Answer the following questions a Question: Assume that 2 Muba village has a total population of 100,000 people. Out of this, 75,000 are part of the labor force (employed or actively seeking employment). If 12,000 people are currently unemployed, what is the tinemployment rate? Calculate the employment rate for that village? 4marks Question: Juru Resto raises the price of alate front S4 to $4.50, resulting in a 10% decrease in the quantity demanded. Calculate and interpret the price elasticity of demand for Jura Resto. 4 marksQuestion: Suppose CN bank lends $200,000 to a homebuyer at a nominal rate of 3%. [Assume the inflation rate is 2%, Calculate the real interest rate 2 marks SECTION B. Attempt any 3 questions 112 Marks each Question 4: As both saving and investment are equal in an economy, they havea positive relationship with one another in the financial system, As the leader of a business firm, draw and explain the Financial System, Saving and Investment relationship. Question $: Unemployment imposes costs on individuals and nations, Inflation represents a situation whereby the pressure of aggregate demand for goods and services exceeds the available supply of ‘output. Money has made rapid economic progress possible in this modern age. Required: Explaining the relationship betwoen employment level, money and inflation. ‘Question 6: How much should one set aside to pay $50 per year for maintenance on a gravesite if interest is assumed to be 49%? For perpetual maintenance, the principal sum must remain undiminished after the annual disbursement is made Question 7: Assume an investor deposits $100,000 in a bank account for | year with annual interest of 16% and will take the $100,000 in the end of 1 year. Required: Calculate Before-Tax Cash Flow and After-Tax Cash Flow in this investment considering the income tax of 25%, ‘Question 8: The management team ofa small furiture-manufucturing company is under pressure to increase profitability 10 get a much-needed loan from the bank to purchase a more modern pattem-cutting machine. One proposed solution iso sell waste wood chips and shavings toa local Thareoal manufacturer instead of using them to fuel space heaters for the company’s office and factory areas. Required: i. Define the.company’s problem, Next, reformulate the problem in a variety of creative ways. ii, Develop at least one potential alternative for your reformulated problems in Part (a), (Don't concern yourself with feasibility at this point.) SECTION C. Attempt any 2 questions 122 Marks each QUESTION 9: ‘ ‘The cost-accounting records of a large company Show the average monthly costs for the three- person printing department. The wages'of the tree department members and benefits, such as vacation and sick leave, make up the first category of direct labor. The company’s indirect or overhead costs such as heat, electricity, and employee insurance must be distributed to its variousthis one use flor space a the basin ner and, like many other firtsy departments in some mann its allocations. Direct labor (including empl loyee benefits): $ 6,000 ‘Materials and supplies consumed: $7,000 Allocated overhead costs 200 m of floor area at $25/in* $5,000 $318,000 Total the orher departments for its services to recover its $18,000 “The printing department charges for the shipping department is: monthly cost. The charge to run 30,000 cops Direct labor $228 Materials and supplies $294 Overhead costs S291 Total costto other departments $793 “The shipping department checks with a comméril printer, which would PN the same 30,000 copies for $688, The shipping department foreman wants to have te ‘work done externally. The sain printing department objects to this, Ag ares he general manager bas asked YOU to stdy the situation and recommend what should be done. QUESTION 10: ‘A famer want osell the Sesh strawberries at $2, Youre willing fo pay upto $5 Pe basket for dha but you find a vendor charging for $3 per baskt. Using he ealeation of tis example, ifferentate clearly consumer surplus and producer surplus QUESTION 11: eed on the data below, analyze the performance of Clover Corporation forthe past two Years? Hacesars the iimpliations of these tends for the company’s future performance? Whst recommendations would you make (0 management based on your analysis?CLOVER CORPORATION Comparative Income Statements. For the Years Ended December 31 Increase (Decrease)| This Year| Last Year || Amount % [Sales '$ 520,000 || $ 480,000 || $_ 40,000 83 Cost of goods sold 360,000 || 315,000 | 45,000 |" 14.3 [Gross margin 160,000 || 165,000 | (5,000) G.0)| [Operating expenses 128,600 || 126,000 2,600 24 31,400 [39,000 17,600) _(19:5) linterest expense 6,400 7,000 {600)||__(6.6)| Net income before taxes 25,000 || 32,000 (7,000)|| (21.9) Less income taxes (30%) 7,500 9,600 (2,100) (21.9) Net income, 3_17,500 [$22,400 [$ (4,900) (21.9) QUESTION 1: Based on the data below, compare the performance of ABC Company of the past two years using common-size analysis? What are the implications of your findings for the company's future performance? What recommendations would you make to management based on your findings? ‘Line item pois! [2019 —*(2020___—[Change (%) |Current assets 8% | [91% 90% (2% |: Cash & equivalents aay (62% 57% (9% Accounts receivable is% [13% 15% [4% - laventories aim fis (ism 3% Fixed assets 12% (8% 8% 4% Other assets 1% 1% 1% ow. Total assets 100% [100% [100% __|o% [Current liabilities [20% |is% 16% 4% = Accounts payable fis% 14% 16% (3% Longeterm debt 9% [7% 4%. 5% (Other liabilities 1% 1% 1% lov {Total liabilities 30% [22% lam —_|-9%% TOwners equity [70% 7 [78 70% [ove |: Retained earings 60% [oar [r1% [11% GOOD LUCK!QUESTIONS Raper cet sceeo Using example, explain clearly the three different methods cashflow analysis namely ‘a) Common size methods 1) Trends analysis ¢) Ratio analysis (solveney, profitability, liquidity) Goop LUCKQUESTION A) Using example, explain three depreciation methods of your own. What equipment/machinery which does not depreciate? B) What are the main cash flow statement methods? Explain with example, Goon LUCKEXPLA 'A) Explaining with example the concept “input market”, explain clearly the factor to consider while setting the price on the labor market B) Let's say you invented a new product. It cost $10 to make the product. How much would you sell the product for? Well, it would have to be more than $10 to make a profit, but ‘what is the perfect price? You first try to sell the product for $100, but no one buys it. So, You lower the price to $50 now you sell 100 of them. When you Tower the price again {0 '$25 you sell 1000. This is great! When you lower the price to $12 you sell 5,000. Required: Of the above options, what isthe best price for your produet? What are the markets that will the business participate in? GOop Luckyoe ge Attempt all questions / 30 Marks MULTIPLE CHOICES s the statement: “CORRECT” or “INCORRECT™? | mark each 1. Savings refer to the prt ofthe income individuals choose not to consume while the investment S the purchase of new equipment using the saved amount for profit making purpose. teach price while ‘Supply refers to the quantity of goods or services a producer is willing to supply demand to refer to the quantity of some goods or services consumers are willing and able to purchase at exch price Interest rates affect the value of money and project feasibility 4, Depreeiations decrease the value of assets overtime due to its usage. Full employment is also known as unemployment 6. Microeconomics is focused on the actions hat governments and counties take to inffuence broader ‘economies while Macroezonomies is oncemed with the actions of individuals and businesses. +7 eonomie goods are goods and services tat are realy available in abundance and have no price ‘They are not scarce, and consumers can aceass them without paying. Examples include alt, sunlight, and rainwater while Free goods ae goods and services that are ssarce and have a postive Price, Consumers must pay to acquire ther, asthe supply i limited compared to demand [Examples include food, clothing cars, and haircuts. 8. GNP=consumption + investment + govemment spending + exports ~ imports 9. GDP ‘outflow to foreign assets) = 8 = GDP = NR (Net income from assets abroad or Net Income Receips) - NP (Net payment 10: Inflation affects the value of money and the worth of interest Il, _Answer the following questions: 4 marks cach 'A) Explain te relationship between Demand and Market Prices B) Explain the relationship between Supply and Market Prices ) Differentiate Monopsony from Monopoly markets ) Differentiate Nominal interest from Real interest ©) Suppose a bak lends $200,000 toa homebayer at a nominal rate of 3%, Assume the ination rate is 2%, Caleulate the rel interest rate SECTION B, Choose five questions! 70 marks each 1) Question: Let us assume that Butae Cells 9 otal population of 100,000 peeple, Out ofthis, {100 are part of the labor force (employed af ectvely seeking employment). If 12,000 people ~Pumenty unemployed, what i dhe unemployment rate? How many people who have job? {iy Question: Distinguish four types of Unemplajment