Question 1 a) Research and Development projects in the New Product Development and Innovation are capital intensive and

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Question 1 A Research And Development Projects In The New Product Development And Innovation Are Capital Intensive And 1 (63.99 KiB) Viewed 31 times

Question 1 a) Research and Development projects in the New Product Development and Innovation are capital intensive and required adequate finance to avoid locking up scarce resources in projects. There exist three alternatives, but not mutually exclusive sources of finance useful for these kinds of projects. State and explain these sources of finance and how they differ from each other. (8 Marks) b) Identify five (5) factors a Marketing and Public Relations business is required to consider when choosing financing methods for a marketing adverting campaign in the industry. (5 Marks) c) Michalleti Marketing Consulting Ltd issued Gh¢500million of zero-coupon bonds with ex-interest of Gh¢ 120, due for repayment in 5years time at par. Its current market price is Ghe 105. What is the company's cost of debt capital? (2 Marks) Question 2 The most recent financial information of Janana Informa Communications Ltd is provided for the year 2020. Jaana Informa Communications Ltd Balance Sheet As At 31" December 2020 GHC'000 GHC'000 Fixed Assets 46,850 Current Assets 8,640 Current Liabilities 1.440 7,200 Total Assets less Current Liabilities 54,050 8% Preference Shares (GHC1.00) 10,600 12% Debentures (Redeemable in January 2028) 20,200 10% Bank Loans 8,250 39.050 15,000 Ordinary Shares (GHCO.50) 12,000 Reserves 3,000 15,000 Additional Information: i) Yields on Treasury Bills 8% ii) Company Equity Beta 1.50 iii) Market Risk Premium 5.4% iv) Current ex-div. Ordinary share price GHC2.50 V) Current ex-div. Preference share price GHC0.60 vi) Current ex-interest Debenture market value GHC105 vii) Corporation Tax 25% Required: Calculate: a) Using Capital Assets Pricing Model (CAPM) the cost of Equity Capital b) Cost of Preference Share Capital c) Cost of Debt before Taxation d) Cost of Debt after Taxation e) Weighted Average Cost of Capital (WACC) (15 Marks) 130 Marks/