THE UNIVERSITY OF ZAMBIA

SCHOOL OF EDUCATION

DEPARTMENT OF ADULT EDUCATION AND EXTENSION STUDIES

JUNE 2018 EXAMINATION

COURSE: BUSINESS MATHEMATICS AND STATISTCS (BUS1220)

INSTRUCTIONS
1. Do not start answering the questions before you are told to do so.
2. This paper contains SEVEN (7) questions. You are required to answer any FIVE (5).
3. Duration: 3 hours.

QUESTION ONE

DIY Ltd. is investing in an extension to one of its factories. The cost of construction now is €50,000, €30,000 will
be invested in equipment in 12 months time and a further €8,000 at the end of 2 years. The management
accountant estimates that the cash inflows will commence at the end of year 3 and will continue as set out in the
following schedule. The residual value of the equipment at the end of year 7 is €10,000.

Year 3 4 5 6 7
Cash Inflows € 30,000 30,000 30,000 30,000 20,000

The cost of borrowing to the company is 12%.

You are required to:

i. Calculate the Net Present Value of the project and advise the company if it should proceed 10 marks
ii. Calculate the internal rate of return of the investment the company should expect and interpret your results
5 marks
iii. Outline the Characteristics of NPV, IRR as the key methods of Evaluation of financial decisions
5 marks
QUESTION TWO

Superior has assessed the number of overtime hours worked by its shift staff each month and produced the following

Overtime hours worked No. employees

50 < 60 3
60 < 70 15
70 < 80 20
80 < 90 25
90 < 100 18
100 < 110 8
110 < 120 2

You are asked to:

i. Calculate the mean overtime hours worked and the standard deviation. 10 marks

ii. Derive the median overtime hours worked and explain its relationship to the mean .10 marks

QUESTION THREE

A management accountant is attempting a cost-output relationship for his company. The following data has been collected over
the past two years.

Units of Cost
Year Quarter output € 000s
000s

2010 1 10 32
2 20 39
3 40 58
4 25 44

2011 1 30 52
2 40 61
3 50 70
4 45 64

i. Using linear regression analysis, derive the relationship between the variables and interpret the answer 12 marks
ii. Estimate the strength of the relationship between the variables and explain the principle of the correlation
8 marks
QUESTION FOUR

Quantra Ltd. is a national wholesaler who provides a range of branded products to retailers with a recommended
retail price for each product. The company has become aware that many retailers are selling products below the
recommended price. In a random sample of 200 retailers, it was found that 79 retailers sold products below the
minimum price. In order to assist the accountant with the report, you are asked to:

i. Describe what a random sample is and how one can be selected. 4 marks

ii. Calculate 95% confidence limits for the proportion of retailers selling below the recommended price and
explain what this means.
8marks
iii. Estimate the size of sample that would be necessary to be certain that the population parameter could be
estimated within a 2% sampling error and explain your answer.
8 marks

QUESTION FIVE

As the financial accountant in your company, you provide advice to staff on a range of financial issues. Advise your
staff on the following:

i. JN Snow has won €150,000 on the Prize Bonds. How much money should he invest at a return of 6% p.a.
as to provide an annual income of €15,000 for his daughter for a period of 10 years?
8 marks

ii. Your colleague in the accounts department wishes to purchase an apartment. She states that she can afford
to pay €1,400 per month. She has been offered a mortgage at an interest rate of 15% over a 20-year term.
What is the maximum amount she can borrow?
8 marks

iii. The Support Credit Union is offering interest rates on saving accounts of 18% compounded monthly. You
have been asked to provide the Annual Percentage Rate (APR). 4 marks

QUESTION SIX

a. For your next presentation to the management team, you are asked to explain the following:

i. The key elements of a time series. 5 marks

ii. The use of a time series for forecasting. 5 marks

b. Explain, with reference to index numbers, any four of the following:

i. Indices - their use and construction

ii. An expenditure index

iii. A price index

iv. A volume index

v. The base period 10 marks

QUESTION SEVEN

a. $20,000 is invested at an interest rate of 4%, which is compounded annually.

i. What will be the investment value to the nearest $ after 10 years 3 marks
ii. After how many years, will the investment approximately double 3 marks

a. An item of machinery that was purchased 5 years ago for $100,000 now has a value of $50,000.
Assuming the reducing balance method of calculation, find the annual rate of depreciation. 4 marks

b. Find the coefficient of 𝑥 7 in the expansion of (2 + 𝑥)11 4 marks

𝑛 3
c. | | = 64, solve for n 4 marks
5 𝑛+4

3 5 7 3 5 8
d. Solve (8 2 1) + ( 7 3 1) 2 marks
3 2 1 4 5 0