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a) TUKE Ltd produces chairs and tables from material provided by local suppliers. The company has an estimated requirement in 2021 for 12,000 units of stock from its suppliers to meet customer demand. TUKE's estimated annual carrying cost per unit of stock is 4 and its estimated cost of placing and receiving each stock order is 60. TUKE Ltd is considering allowing stockouts to occur and estimates that the cost of such would be 8 per unit of average stockout. Assuming that TUKE Ltd is willing to face stockouts, calculate TUKE's optimal 2021 stock ordering policy and the total annual cost of this policy. (5 marks) b) XHAMMA Co has current sales of 2 million per year. Cost of sales is 70% of sales and bad debts are 2& of sales. Cost of sales comprises 60% variable cost and 40% Fixed costs. The company finances working capital from an overdraft at a rate of 8% per year. XHAMMA Co currently allows customers 20 days credit but is considering increasing this to 50 days credit to increase sales. It has been estimated that this change in policy will increase sales by 10%, while bad debts will increase from 2% to 5%. It is not expected that this policy change will result in an increase in fixed costs, and payables and inventory will be unchanged. Should XHAMMA Co introduce the proposed policy. (7 marks) c) AQA Plc exists in a world without personal or corporate taxes. The firm is financed by way of 600,000 equity shares of 1 each nominal value and 140,000 (nominal value) 5% redeemable debt. The shares have a current market value of 2.80 per share cum dividend, with a dividend of 30 pence per share about to be paid. Total dividends on the shares over the past four years have been 95,000, 109,000, 119,000 and 134.000, and the total dividend about to be paid is 180,000. The market value of the firm's debt is currently 85 per nominal 100. Debt interest for the year is about to be paid, and a premium of 2% is payable on redemption of the debt in four years time Calculate (3 marks) i. Cost of equity ii. Cost of debt ii. Weighted average cost of capital (7 marks) (3 marks) a) TUKE Ltd produces chairs and tables from material provided by local suppliers. The company has an estimated requirement in 2021 for 12,000 units of stock from its suppliers to meet customer demand. TUKE's estimated annual carrying cost per unit of stock is 4 and its estimated cost of placing and receiving each stock order is 60. TUKE Ltd is considering allowing stockouts to occur and estimates that the cost of such would be 8 per unit of average stockout. Assuming that TUKE Ltd is willing to face stockouts, calculate TUKE's optimal 2021 stock ordering policy and the total annual cost of this policy. (5 marks) b) XHAMMA Co has current sales of 2 million per year. Cost of sales is 70% of sales and bad debts are 2& of sales. Cost of sales comprises 60% variable cost and 40% Fixed costs. The company finances working capital from an overdraft at a rate of 8% per year. XHAMMA Co currently allows customers 20 days credit but is considering increasing this to 50 days credit to increase sales. It has been estimated that this change in policy will increase sales by 10%, while bad debts will increase from 2% to 5%. It is not expected that this policy change will result in an increase in fixed costs, and payables and inventory will be unchanged. Should XHAMMA Co introduce the proposed policy. (7 marks) c) AQA Plc exists in a world without personal or corporate taxes. The firm is financed by way of 600,000 equity shares of 1 each nominal value and 140,000 (nominal value) 5% redeemable debt. The shares have a current market value of 2.80 per share cum dividend, with a dividend of 30 pence per share about to be paid. Total dividends on the shares over the past four years have been 95,000, 109,000, 119,000 and 134.000, and the total dividend about to be paid is 180,000. The market value of the firm's debt is currently 85 per nominal 100. Debt interest for the year is about to be paid, and a premium of 2% is payable on redemption of the debt in four years time Calculate (3 marks) i. Cost of equity ii. Cost of debt ii. Weighted average cost of capital (7 marks)

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