Reference no: EM132595955

1. What is capital rationing?

2. A company YZ based in Mazeras in Mombasa whose annual cashflow is as follows:

State of economy profitability cash flow

Best period 0.2 60,000

Moderate 0.5 40,000

Worst period 0.3 30,000

Required: Calculate the expected cash flow in a year's period

3. The same organization YZ has a similar project in Lamu at the coast running for 3 consecutive years.

Year/Period Cash flow (sh)

0 starting end of the year (150,000)

(2021) 40,000

(2022) 60,000

(2023) 100,000

(a) Required: Estimate the IRR-Internal Rate of Return

(b) Comment on the project, should it be undertaken or not and why?

4. Explain how agency theory is used in financial management of a business firm

5. Explain briefly, on what basis replacement decision is made. Give relevant example.

6. Explain how any two groups below may have issues with shareholders and how they are tackled.

(a) Auditors to the firm

(b) Foreign branches