Financial Management Exam
Financial Management
Thursday 9 June 2011
Time allowed
Reading and planning:
Writing:
15 minutes
3 hours
ALL FOUR questions are compulsory and MUST be attempted.
Formulae Sheet, Present Value and Annuity Tables are on pages 7, 8 and 9.
Do NOT open this paper until instructed by the supervisor.
During reading and planning time only the question paper may be annotated. You must NOT write in your answer booklet until instructed by the supervisor.
This question paper must not be removed from the examination hall.
The Association of Chartered Certified Accountants
Paper F9
Fundamentals Level – Skills Module
ALL FOUR questions are compulsory and MUST be attempted
1
BRT Co has developed a new confectionery line that can be sold for $5·00 per box and that is expected to have continuing popularity for many years. The Finance Director has proposed that investment in the new product should be evaluated over a four-year time-horizon, even though sales would continue after the fourth year, on the grounds that cash flows after four years are too uncertain to be included in the evaluation. The variable and fixed costs (both in current price terms) will depend on sales volume, as follows.
Sales volume (boxes)
Variable cost ($ per box)
Total fixed costs ($)
less than 1 million
2·80
1 million
1–1·9 million
3·00
1·8 million
2–2·9 million
3·00
2·8 million
3–3·9 million
3·05
3·8 million
Forecast sales volumes are as follows.
Year
Demand (boxes)
1
0·7 million
2
1·6 million
3
2·1 million
4
3·0 million
The production equipment for the new confectionery line would cost $2 million and an additional initial investment of $750,000 would be needed for working capital. Capital allowances (tax-allowable depreciation) on a 25% reducing balance basis could be claimed on the cost of equipment. Profit tax of 30% per year will be payable one year in arrears. A balancing allowance would be claimed in the fourth
Thursday 9 June 2011
Time allowed
Reading and planning:
Writing:
15 minutes
3 hours
ALL FOUR questions are compulsory and MUST be attempted.
Formulae Sheet, Present Value and Annuity Tables are on pages 7, 8 and 9.
Do NOT open this paper until instructed by the supervisor.
During reading and planning time only the question paper may be annotated. You must NOT write in your answer booklet until instructed by the supervisor.
This question paper must not be removed from the examination hall.
The Association of Chartered Certified Accountants
Paper F9
Fundamentals Level – Skills Module
ALL FOUR questions are compulsory and MUST be attempted
1
BRT Co has developed a new confectionery line that can be sold for $5·00 per box and that is expected to have continuing popularity for many years. The Finance Director has proposed that investment in the new product should be evaluated over a four-year time-horizon, even though sales would continue after the fourth year, on the grounds that cash flows after four years are too uncertain to be included in the evaluation. The variable and fixed costs (both in current price terms) will depend on sales volume, as follows.
Sales volume (boxes)
Variable cost ($ per box)
Total fixed costs ($)
less than 1 million
2·80
1 million
1–1·9 million
3·00
1·8 million
2–2·9 million
3·00
2·8 million
3–3·9 million
3·05
3·8 million
Forecast sales volumes are as follows.
Year
Demand (boxes)
1
0·7 million
2
1·6 million
3
2·1 million
4
3·0 million
The production equipment for the new confectionery line would cost $2 million and an additional initial investment of $750,000 would be needed for working capital. Capital allowances (tax-allowable depreciation) on a 25% reducing balance basis could be claimed on the cost of equipment. Profit tax of 30% per year will be payable one year in arrears. A balancing allowance would be claimed in the fourth