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1、UniSUNIVERSITY OF SURREYSchool of ManagementMScDATE:DURATION: 3 hoursInstructions to candidatesCandidates are required to answer four questions from eight and should show allcomputations and workings. All questions carry equal marks.All question papers and examination scripts must be collected by th
2、e Invigilator at theend of the examination.Additional Material Required:Formulae TablesStatistical TablesNon-programmable Calculators permittedflow statement for the year. However, the fixed asset remains in use in the business. Depreciation is over the period of its useful life. The original purcha
3、se of the fixed asset has no impact on the profit and loss account, but the periodic charges for depreciation do have an impact, in that they reduce profit. The effect of the fixed asset purchase, therefore, is reflected in a single transaction in one year in the cash flow statement. However, the pr
4、ofit and loss account is affected throughout the assets useful life because of the depreciation charge.Question 8Students will be awarded marks according to their demonstration of understanding the implications of gearing ratios for the earnings per share and discussing the components of risk. The f
5、ollowing table gives the calculations:No of shares5,000,0004,000,0003,000,000Profits before interest and taxInterest (7.5%)Taxable NetIncomeIncome Tax (25%)Net Income AfterTaxesEPSProfits before interest and taxInterest (7.5%)Taxable NetIncomeIncome Tax (25%)Net Income AfterTaxesEPS800,000800,000200
6、,000600,0000.12800,00075,000725,000181,250543,7500.14800,000150,000650,000162,500487,5000.16M& M arguments, mention of the tax shield etcQuestionlNiteday make a nightlight for which is budgeted to sell at 5.00 per unit .It is made by taking a budgeted 0.5 kg of material, budgeted to cost 3.00/kilogr
7、am and the budgeted labour time is 15mins at a budgeted cost of 5.00 per hour.Other Budgeted items:Monthly Fixed overheads6,000Budgeted output for September5,000 unitsThe actual results for September were:Sales (5,400 units)26,460Materials (2830 kg)(8,770)Direct Labour (1,300 hours)(6,885)Fixed Over
8、heads(6:350)Actual Operating Profit4,455No stocks were available at the beginning of the month or were left at the end of the month.Calculate the variances for September and reconcile the budgeted and actual profit figures.(18 marks) b) What are the benefits and drawbacks of using standard cost regi
9、me?(7 Marks)Question 2The Deltoid Company has a maximum capacity of 150,000 units per year. It currently plans to produce 100,000 units.The draft budget shows costs as follows:Materials80,000Production Labour120,000Management Salaries75,000Rent and other overhead240,000Variable overheads50,000The sa
10、les price is expected to be 7.50 per unitRequireda) What is the breakeven point in i) units and ii) pound sales?(6 marks)How many units must be sold to earn a target profit of 300,000 per year and how does effect the planned production schedule?(4 marks)If production can be maximised how much flexib
11、ility can there be on the pricing if there is requirement that if the plant runs to full capacity a minimum profit of 400,000 must be achieved.(5 marks)Discuss the benefits and drawbacks of CVP costing over using an absorption method in the context of enhancing management decision making.(10 marks)Q
12、uestion 3Assume a company has a corporate-wide debt/equity ratio of 1:2, cost of debt is 7%, and a cost of equity capital of 15%. The directors are considering undertaking a foreign project and estimate that the debt capacity of the project is the same as for the company as a whole, but its systemat
13、ic risk is such that the required return on equity is estimated to be about 12%; and the cost of debt is expected to remain at 7%. Assume that the firms marginal tax rate is 40%.(a) Show calculations of the projects weighted average cost of capital and compare it with the parents Weighted Average Co
14、st of Capital (WACC).(12marks) b) The calculation of the WACC is straightforward in theory, but in practice it is not an easy task. Outline the possible difficulties that might be(13marks)(13marks)experienced when trying to calculate the WACC.Question 4Below are the accounts for Fashionl Plc a Leeds
15、 based retail fashion company. Write a report on the financial performance of this company over the past year using this published information. Include in your commentary an indication of what further information would be useful for your analysis.(25 Marks)Consolidated Profit & Loss Account for the
16、year 2004 2003Ended Dec 31stTurnoverCost of salesGross ProfitOperating ExpensesOperating Profit million million1871.7-1308.1563.6-305.0258.61588.5-1110.3478.2-265.7212.5Profit before interest and taxationNet interest receivable (payable)Profit on ordinary activities before taxationTax on profit on o
17、rdinary activitiesProfit on ordinary activities after taxationDividendsRetained profitConsolidated Balance SheetFixed assetsTangible AssetsInvestmentsTotal Fixed AssetsCurrent assetsStockDebtors due within one yearCash at bank and in handTotal Current AssetsCreditors: Amounts falling due within one
18、yearNet Current Assets (liabilities)Total assets less current liabilities258.6 213.87.24.6265.8 218.4-76.0 -60.8189.8 157.6-89.0 -73.7100.8 83.9258.6 213.87.24.6265.8 218.4-76.0 -60.8189.8 157.6-89.0 -73.7100.8 83.9296.5 287.638.139.4334.6 327.0174.7 174.0278.6 269.0201.4 104.2654.7 547.2-403.2 -346
19、.6251.5 200.6586.1 527.6Creditors: Amounts falling due after more than one year -20.4 -18.5Provisions for liabilities and chargesNet assetsCapital and reservesCalled-up share capitalShare premiumOther reservesProfit and loss accountEquity shareholders funds18.89.4546.9 499.733.133.73.83.819.919.6490
20、.1 442.6546.9 499.718.89.4546.9 499.733.133.73.83.819.919.6490.1 442.6546.9 499.7Question 5Corporate Governance has occupied the minds of CEOs for much of the past decade The Economist Jan 2005.Why has this been the case and has corporate governance improved? Illustrate your answer with reference to
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