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    Bcf402-Financial Modeling & Forecasting (Autosaved)

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    Mulwa Muthoka

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    Bcf402-Financial Modeling & Forecasting (Autosaved)

    Uploaded by

    Mulwa Muthoka
    2 views4 pages

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    © © All Rights Reserved

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    Copyright:

    © All Rights Reserved
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    2 views4 pages

    Bcf402-Financial Modeling & Forecasting (Autosaved)

    Uploaded by

    Mulwa Muthoka

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 4

    MURANG’A UNIVERSITY OF TECHNOLOGY

    SCHOOL OF BUSINESS AND ECONOMICS


    DEPARTMENT OF COMMERCE

    UNIVERSITY ORDINARY EXAMINATION

    2020/2021 ACADEMIC YEAR


    FOURTH YEAR FIRST SEMESTER EXAMINATION FOR BACHELOR OF
    COMMERCE& BACHELOR OF PURCHASING AND SUPPLY

    BCF402– FINANCIAL MODELING & FORECASTING


    DURATION: 2 HOURS

    Instructions to candidates:

    1. Answer question One and Any Other Two questions.


    2. Mobile phones are not allowed in the examination room.
    3. You are not allowed to write on this examination paper.

    1
    QUESTION ONE -(30MARKS)
    a) Explain three uses of time series data and give a relevant example in each case. (6marks)
    b) The table below shows the production of wheat flour in metric tons in a successive year: -

    Year No. of tablets


    2011 11
    2012 14
    2013 22
    2014 17
    2015 27
    2016 29
    2017 25
    2018 39
    2019 32

    Required: -
    i. Use the semi average method to determine the line of best fit. (2marks)
    ii. Draw a scatter diagram and super impose the line best fit over the points. (4marks)
    c) Differentiate between regression analysis and correlation analysis. (2marks)
    d) Zed Ltd produces a component that is meant for local market. During the month of October
    2020,1000 units were produced incurring expenditures as follows: -

    Sh’000’
    Direct expenses 45
    Direct labour 60
    Rent (fixed) 37.5
    Electricity (40%fixed) 50.5
    Property taxes &rates(80%) 65
    Depreciation (fixed) 42
    300

    Required: -
    i. Using the accounts analysis approach formulate the total cost function. (6marks)
    ii. Zed Ltd plans to produce 4,000 units of output. Estimate the production cost. (2marks)
    e)
    e) Discuss the steps in the forecasting process. (8marks)

    2
    SECTION B: ANSWER ANY TWO QUESTIONS
    QUESTION TWO- (20MARKS)
    a) State four assumptions of linear regression. (4marks)
    b) The total cost and output volumes of a manufacturing company in the first six months of the year
    was as follows: -

    Month Output(‘000’units) Total cost(Sh’000’)


    Jan 5 146
    Feb 7 152
    Mar 6 148
    Apr 5 142
    May 8 164
    Jun 6 152

    Required: -
    i. Using the ordinary least square (OLS) method, generate a total cost function. (6marks)
    ii. Estimate the expected cost in September if output volume is expected to be 8,000 units. (2marks)
    c) Seven entries in a competition were ranked by two judges as shown below: -

    Entry P Q R S T U V
    Assessor I 5 2 3 4 1 6 7
    Assessor II 4 3 2 1 6 7 5
    Required: -
    i. Determine the spearman’s rank correlation co-efficient (6marks)
    ii. Make an observation and a conclusion from the above findings. (2marks)

    QUESTION THREE -(20MARKS)


    a) The management of Leo’s Bookshop wishes to establish the amount of financing required in the next
    5years ending 30th June 2025.The statement of financial position for the company for the year ended
    30th June 2020 was as follows: -
    Sh’000’
    Non –current assets 187,200
    Inventory 57,600
    Trade receivables 43,200
    Cash 10,800

    298,800

    3
    Financed by:
    Ordinary share capital 126,000
    Retained earnings 52,800
    12%long term debt 30,000
    Trade payables 54,000
    Accrued expenses 36,000

    298,800
    Additional information: -
    i. For the year ended 30/06/2020, sales amounted to Sh360.000, 000.Sales are projected to increase
    by 15% per annum in the foreseeable future.
    ii. The after tax return on sales is 8% which is expected to be maintained in the foreseeable future.
    iii. The company intends to maintain a dividend payout ratio of 20%.
    iv. Any additional external financing will be effected through the use of commercial paper.
    Required: -
    i) Determine the amount of financing required by 30/06/2025. (8marks)
    ii) A pro-forma balance sheet as at 31/12/2025. (4marks)
    b) i)Define the term goodness of fit. (2marks)
    ii)A student at MUT saw a model
    y=80+0.8x where
    x-no of exam script marked (‘00’)
    y-cost of marking(Sh’000’)
    the correlation between the two variables was 0.87
    required: -
    i. Explain the meaning and what you deduce from the correlation co-efficient (0.87) between
    the two variables. (3marks)
    ii. Determine the goodness of fit and interpret your findings. (3marks)

    QUESTION FOUR- (20MARKS)


    a) The table below shows the number of new cars produced by quarters during the period of 3years:

    Year Quarter 1 Quarter2 Quarter3 Quarter4


    2018 55.0 76.5 61.2 77.8
    2019 54.4 65.9 52.7 81.4
    2020 59.3 83.2 78.5 93.0
    Required: -
    i. Compute the four point moving averages and center them. (8marks)
    ii. Completely decompose the time series assuming an additive model. (6marks)
    iii. Explain thru application of budgets. (6marks)

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