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Question 6 (a) The main objective of a business is to maximize the profit while for the shareholders is maximizing the shareholder's wealth. To achieve these financial goals, the management and the operational staff need to focus ensuring the objective will be able to achieve within the time frame given. Planning outlines the company's financial direction and creates a model of expectations for the next three to five years is crucial Planning is often the first step in setting up a company or start up a new project or new line of production 1. Based on your understanding, briefly explain the significance of capital budgeting (9 marks) it. Analysing the best project to invest requires the analyst to utilize the capital budgeting techniques into the analysis. There are two types of project that will affect the decision of the analyst whether to invest or not to invest. Identify and elaborate the TWO (2) types of projects in capital budgeting (6 marks) (b) Once a company makes a profit, management must decide what to do with those profits. It could keep the profits within the company or distribute them in the form of dividends to the owners of the company. Once the company decides to pay dividends, it can establish a dividend policy that is in a sense, permanent, which in turn can affect investors and the perception of the company in the financial markets How they decide depends on the current and future situation of the company. It also depends on the preferences of investors and potential investors There are various theories that try to explain the relationship of a firm's dividend policy Briefly interpret any FOUR (4) of those theories (4 marks) (c) Your mother is planning to retire this year. The company that she has been working offered a lump-sum retirement payment of RM300,000 or a RM40,000 lifetime at the end of each year, whichever she chooses. She is in reasonably good health and expects to live for at least 15 more years. Assuming that there is 8 percent annual interest rate, calculate the appropriate evaluation on the annuity. (6 marks) [25 Mark]

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