Exercise 5

The company had problems with Current Receivables that decreased solvency of enterprise. So, financial department was tasked to evaluate necessity of factoring use. In this case you have:

1. Invvestigate Period Turnover structure of Current Receivables;

2. Calculate and confirm the amount of Refinancing Current Receivables;

3. Evaluate the cost of factoring;

4. Confirm if it’s expedient factoring according to it’s efficacious.

А) Data of amount and Turnover Period Current Receivables

Period Turnover	Current Receivables, thousand UAH
10 days	40
20 days	100
30 days	14
40 days	6
Total	160

The average turnover period of Current Receivables have to be 17 days, to keep the normal financial state.

B) Terms of factoring:

Commission payment of factoring is 2% of loan sum. A Bank will give a credit in sum of 75% of Receivables. The average market interest rate is 20%.

Exercise 6

The company spends 220 thousands UAH per year to return debts.

Revenue from sales in credit terms is 12 mln UAH. The average turnover period of Returns is 2.5 months, hopeless debts are 4% of revenue.

If the company make twice increase staff, the turnover period receivables will be 2 months and expenses of hopeless debts will be 3%.

The additional expenses of stuff keeping will amount 180 thousand UAH.

Does it worth to make such changes if alternative expenses are:

А) 20%;

B) 10%.

Exercise 7

The enterprise is planning to include the following sources financing start of it’s activity:

Indicators	Amount, thousand UAH
1. Regular shares Capital	90
2. Preference shares Capital	35
3. Bank loans’ Capital	40
Total	165

а) the market vale Preference shares is – 30 UAH, amount of dividend is – 7 UAH/share in a year.

б) the market value of Market price Regular shares – 40 UAH., dividend –10 UAH a year; rate of dividend increase – 2% a year.

в) the interest rate of long term bank’s loan is 10% a year.

г) Average industrial rate of Return on Assets is 30%.

Evaluate if it’s verse to create such structure of capital. In this case you have:

1. To evaluate the value of each kind of involving capital;

2. To evaluate the average value of capital;

3. To make conclusion of necesserity to keep proposed structure of the capital.

Table 1 Measuring the value of a capital:

Indicator	Calculating
1. Regular shares Capital
2. Preference shares Capital
3. Bank loans’ Capital
TOTAL

Table 2 Calculating the average value of capital

Indicators	Amount, thousand UAH	Structure, %	Value,%
1. Regular shares Capital
2. Preference shares Capital
3. Bank loans’ Capital
Average Value of Capital