Neco 2022 Commerce Question 8

Practice essay / theory question 8 from the 2022 Neco Commerce examination. This question covers Sources of Finance .

Neco 2022 Commerce Essay / Theory

Topic: Sources of Finance

Question 8 NECO • 2022 • COMMERCE • essay

GreenHarvest Ltd., a medium‑sized agro‑processing firm, needs ₦5,000,000 to purchase new processing equipment. The firm is evaluating three sources of finance: a bank loan, issuing 5% debentures, and a rights issue of ordinary shares.

Question Parts

( a )

For each of the three sources of finance mentioned, discuss one advantage and one disadvantage in the context of GreenHarvest Ltd.

( b )

The bank offers a loan of ₦5,000,000 at an annual interest rate of 12% payable annually over 5 years. Assuming the loan is repaid by equal annual repayments of principal only (i.e., ₦1,000,000 each year) and interest is calculated on the outstanding balance each year, calculate (i) the total interest payable over the life of the loan and (ii) the average annual repayment (principal + interest).

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About This Question

This is Neco 2022 Commerce Question 8. It is one of the essay questions from the 2022 Neco Commerce examination.

The question covers Sources of Finance .

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