ICAN 2026 Financial Management | Mixed

Kay Ltd (KL) manufactures and sells specialised aluminum scooters. The company has been very successful, with sales growing rapidly in recent years. A number of new retail outlets have been opened to extend the company’s geographical coverage and cope with the rapid increase in demand. Each retail outlet holds a wide range of available stock. Despite profits increasing over the past few years, the company’s overdraft has risen significantly to the point where it is approaching the limit of its overdraft facility, which is currently ₦5.5 million. Extracts from KL’s accounts for the last two years shows the following: Statement of financial position at 30 September 2025 2024 ₦000 ₦000 ₦000 ₦000 Non-current assets 10,600 6,000 Current assets: Inventory 2,400 1,600 Trade receivables 3,300 2,200 5,700 3,800 Current liabilities: Overdraft 5,200 2,700 Trade payables 1,000 500 (6,200) (3,200) Net current (liabilities)/assets (500) 600 Bank loan (5,000) (3,000) Net assets 5,100 3,600 Share capital 1,000 1,000 Profit or loss account 4,100 2,600 Shareholder’s equity 5,100 3,600 Profit or loss account extracts for the years to 30 September 2025 2024 ₦000 ₦000 Sales 12,000 8,000 Cost of sales (6,000) (4,000) Gross profit 6,000 4,000 Other costs (4,500) (3,000) Profit for the financial year 1,500 1,000

Feli Plc. operates a low-cost road transportation business and the company is listed. By comparison to its major competitors, Feli Plc is relatively small, but it has expanded significantly in recent years. The shares are held mainly by large financial institutions. The following are extracts from Feli Plc.’s budgeted statement of financial position at May 31, 2025: Ordinary shares of ₦1 100 Reserves 50 9% bonds 2028 (at nominal value) 200 Dividends have grown in the past at 3% a year, resulting in an expected dividend of ₦1 per share to be declared on May 31, 2025. (Assume for simplicity that the dividend will also be paid on this date). Due to expansion, dividends are expected to grow at 4% a year from 1 June, 2025 for the foreseeable future. The price per share is currently ₦10.40 ex div and this is not expected to change before May 31, 2025. The existing bonds are due to be redeemed at par on May 31, 2025. The market value of these bonds at 1 June, 2025 is expected to be N100.84 (ex interest) per ₦100 nominal. Interest is payable annually in arrears on May 31 and is allowable for tax purposes. The tax rate for the foreseeable future is 30%. Assume taxation is payable at the end of the year in which the taxable profits arise. New finance The company has now decided to purchase three additional vehicles at a cost of ₦10 million each. The Board has decided that the new vehicles will be financed in full by an 8% bank loan on June 1, 2025.

Emeka Ltd is considering investment proposals for each of its three divisions: Light Engineering; Food Retailing; and Luxury Goods. The company’s board previously used a single WACC of 17% for all project evaluations. However, the finance team recently determined division-specific WACC rates as follows: Division Risk-Adjusted WACC Light Engineering 16.5% Food Retailing 15.3% Luxury Goods 18.9% Each division has proposed a major capital project for the next investment cycle: Project Division Initial Expected Investment IRR (%) (₦m) A Light ₦500m 16% B Food ₦700m 16% C Luxury Goods ₦800m 18%

You are a proprietary trader at a major Nigerian bank’s international finance desk, tasked with identifying risk-free arbitrage opportunities. You have gathered the following current market data: Current spot exchange rate ₦1,200/$1 1 – Year forward exchange rate ₦1,300/$1 1 – Year US risk-free Interest rate 2% 1 – Year Nigerian risk-free interest rate 10% The dealer is authorised to buy or sell up to US$ 500,000 per transaction.

Omega Industries Ltd is a large Nigerian manufacturing company that has been privately owned for over 15 years. The company has achieved strong profitability and has expanded into neighbouring West African countries. Recently, the board of directors has been debating whether to seek a full listing on the Nigerian Exchange Group (NGX). The managing director believes listing will help the company raise funds for expansion into the renewable energy market, while some existing shareholders are concerned about losing control and facing excessive compliance costs. The finance director has asked you, a financial consultant, to advise the board on two key issues: (i) The likely advantages and disadvantages to Omega Industries and its shareholders of obtaining a full stock exchange listing. (ii) The factors that should be taken into account when determining the issue price of new equity shares, if the company proceeds with the listing.

Assume a company issues a 15% bond with maturity of five years, which matches the life of a new project. The fund raised will be used exclusively to finance the new project.

A Nigerian company ABC has issued convertible bonds with face value of ₦1,000, coupon rate of 4%, paid annually and maturity of 5 years. The conversion ratio is fixed at 10:1.