Neco Model Questions Vol1 2022 Commerce Question 1
Practice objective / multiple choice question 1 from the 2022 Neco Model Questions Vol1 Commerce examination.
A manufacturing firm needs to raise exactly \(N500{,}000\) for expansion. It can obtain finance from three sources: a bank loan at 12% simple interest per annum (effective cost after a 30% tax shield), issuing new ordinary shares that require a dividend of 10% of the issue price, and using retained earnings, which carry no cost but the firm has only \(N100{,}000\) of retained earnings available. The firm must satisfy two conditions: (i) at least 30% of the total finance must be equity (shares plus retained earnings), and (ii) the loan amount cannot exceed \(N300{,}000\). Determine the amount to be raised from each source and compute the total annual cost of the finance package.
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About This Question
This is Neco Model Questions Vol1 2022 Commerce Question 1. It is one of the objective questions from the 2022 Neco Model Questions Vol1 Commerce examination.
Difficulty level: Medium .
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