a). Using the concept of responsibility accounting, demonstrate using real examples how this concept can be widely understood and applied using Strathmore University as an example.
b) Illustrate using examples how different responsibility centres identified in a). above can be measured.
c). Assuming that SMC is in the process of launching a new degree program (BSc in Finance) at the start of academic year 2018/2019. The projected number of students in year 1 will be 200 and the number is expected to increase at 10% per annum for the next 5 years. The launching cost is estimated at 10m and the expected inflow is 142,000 per student. Fixed assets value purchased 3 years with an estimated 10 years useful life depreciated at a 10% per annum using reducing balance method totals 100M.
The CBK interest rate is 14% per annum. Beta is estimated at 0.5. Market rate 16%.
Required.
i) Using ROI, RI and EVA advice the faculty dean on whether to launch the new program or not.
