Waec Model Questions Vol1 2023 Commerce Question 8

Practice essay / theory question 8 from the 2023 Waec Model Questions Vol1 Commerce examination. This question covers Sources of Finance, Bank Loans, Equity Financing, Leasing, Cost of Finance .

Waec Model Questions Vol1 2023 Commerce Essay / Theory
Topics: Sources of Finance Bank Loans Equity Financing Leasing Cost of Finance
Question 8 WAEC_MODEL_QUESTIONS_VOL1 • 2023 • COMMERCE • essay

XYZ Ltd, a medium‑scale manufacturing firm, plans to expand its production capacity by purchasing new machinery costing ₦15,000,000. Management is evaluating three financing options:

Question Parts

( a )
For each option, calculate the total cash outflow over the 5‑year period (ignore tax effects). Show all workings.
( b )
Compute the effective annual cost of financing for the bank loan and the lease option (use simple interest for the loan and treat lease payments as an annuity; calculate the annualised cost as total outflow divided by the principal amount). Compare which is cheaper.
( c )
Considering the impact on the company’s capital structure and control, discuss the advantages and disadvantages of the share issue compared to the bank loan.
( d )
Based on your calculations and discussion, recommend the most appropriate financing option for XYZ Ltd and justify your recommendation with at least two reasons.

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About This Question

This is Waec Model Questions Vol1 2023 Commerce Question 8. It is one of the essay questions from the 2023 Waec Model Questions Vol1 Commerce examination.

The question covers Sources of Finance, Bank Loans, Equity Financing, Leasing, Cost of Finance .

View More Waec Model Questions Vol1 2023 Commerce Questions More Waec Model Questions Vol1 Practice Questions Back to Questions

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