Neco 2019 Commerce Question 8

Practice essay / theory question 8 from the 2019 Neco Commerce examination. This question covers Sources of Finance .

Neco 2019 Commerce Essay / Theory

Topic: Sources of Finance

Question 8 NECO • 2019 • COMMERCE • essay

A manufacturing firm requires ₦15,000,000 to expand its production capacity. The firm is evaluating three sources of finance:

( a )

Long‑term bank loan: interest rate 12% per annum, payable annually. The loan can be obtained for the full amount needed.

( b )

Issuing 10% debentures with a face value of ₦5,000 each. Debentures are interest‑bearing securities payable annually.

( c )

Equity financing by issuing new ordinary shares at ₦2,500 each. The firm expects to pay a dividend yield of 8% on the market value of the shares.

( d )

The expansion is projected to generate an additional profit of ₦3,000,000 per year. For each financing option, evaluate:

( ) Cost comparison.

( ) Risk assessment.

( ) Effect on control.

( ) Break‑even profit requirement.

Get the step-by-step solution, key points required by examiners and detailed marking guidance through the Edcrib AI Tutor.

This is Neco 2019 Commerce Question 8. It is one of the essay questions from the 2019 Neco Commerce examination.

The question covers Sources of Finance .

You've seen a preview, but there are thousands more questions plus AI tutor to break down complex solutions.

Unlock Full Access Available for Android & Windows