[PDF] Advanced Financial Management Specimen Exam applicable from. September





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ACCA P4 Advanced Financial. Management. Answer Bank. Exam Timed Attempt at the. Last Published Exam Paper September/December 2016 – Sample Questions.



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4 Jun 2012 Examiner's report. P4 Advanced Financial Management. June 2012. General Comments. The structure of the paper was similar to past papers with ...



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It is also possible that the management teams within Burgut Co and Opao Co had disagreements in the past and Opao Co's BoD may have believed the two management 



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7 Dec 2018 Chartered Certified. Accountants. AFM ACCA ... Over the last few years. Amberle Co has used a mixture of equity and debt finance for its ...

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Formulae and tables are on pages 8-12.

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j=A C@sA.$w=AC@sA$=@

;wrr-s$;oo =>s@oBw=Proposal one

rw@sqB=@.$Ev=$ww ,w-o$ >oG;s,ww-o$t=C@0G so@$QVTB3.333.333$-=o<$Boys<$=CB$B=$>o@B0tC$=t$t=C@$p@o@=>=Ao-$BE=$ps-=E-1

Additional information relating to proposal one

hEwBHs@-oExchange-traded currency futures :0;=w@G5J3B;C

B0;=w@G5J3BAE

Exchange-traded currency options

Call OptionsPut Options

Exercise price3-month expiry6-month ex piry3-month expiry6-month expiry

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Over-the-counter products

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1=

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As an alternative to paying the principal on the loan as one lump sum at the end of the fourth year, CMC Co could

pay off the loan in equal annual amounts over the four years similar to an annuity. In this case, an annual interest

rate of 2% would be payable, which is the same as the loan"s gross redemption yield (yield to maturity).

EjghgkPd log

This proposal suggested setting up four new branches in four different countries. Each branch would have its own

production facilities and sales teams. As a consequence of this, one of the two European-based production facilities

will be closed. Initial cost-benefit analysis indicated that this would reduce costs related to production, distribution

and logistics, as these branches would be closer to the sources of raw materials and also to the customers. The

operations and sales directors supported the proposal, as in addition to above, this would enable sales and marketing

teams in the branches to respond to any changes in nearby markets more quickly. The branches would be controlled

and staffed by the local population in those countries. However, some members of the BoD expressed concern that

such a move would create agency issues between CMC Co"s central management and the management controlling

the branches. They suggested mitigation strategies would need to be established to minimise these issues.

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When the proposals were put to the non-executive directors, they indicated that they were broadly supportive of the

second proposal if the financial benefits outweigh the costs of setting up and running the four branches. However,

they felt that they could not support the first proposal, as this would reduce shareholder value because the costs

related to undertaking the proposal are likely to outweigh the benefits. cmy5q2mlC

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3wtl qv 4pm m8kphvom.42hlml lm2q6h4q6m uh2sm430(15 marks)

)i,Omuwv3 42h4m pw7 NVN Nw kw5tl imvmnq4 n2wu 4pm 37hx wnnm2ml i9 amk5vqh Hhvs0(6 marks)

)k,Nhtk5t h4m 4pm uwlqnqml l52h4qwv wn 4pm twhv qn q4 q3 2mxhql qv my5ht huw5v43 hvl m8xthqv pw7 l52h4qwv khv im

53ml 4w umh352m 4pm 3mv3q4q6q49 wn 4pm twhv 4w kphvom3 qv qv4m2m34 2h4m30(7 marks)

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)qq,Oq3k533m 3 4pm homvk9 q335m3 2mth4ml 4w x2wxw3ht 47w hvl pw7 4pm3m khv im uq4qoh4ml0(9 marks)

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eTegjPfSme-(4 marks) )61 uh2s3, .&r)r%r

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Notes to NPV appraisal

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,Dww-k=@ywwBo-$o@sqwoBw=<$voDs$<=B$pss<$Boys<$w@sAs

Further financial information

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Required:

(a)Calcul ate the adjusted present value (APV) for the project, correcting any errors made in the net present

value estimate abo ve, and conclude whether the p roject should be accep ted or not. Show all relevant

calculations.(15 marks)

(b)Commen t on the corrections made to the original net present value estimate and explain the APV approach

taken in part (a), including any assumptions made. (10 marks) (25 marks) .&r)r%r

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Strand Co

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Financial information

Hav CoStrand Co

Year ended 30 April20X320X320X220X1

$ million$ million$ million$ million

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B=$ps$83($>s@$Gso@1

Acquisition proposals

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kkT) (kkVV eei ei dde =+(±± )1

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((11 1

±±T))

d b PDg) (rg) oo e ±1 gbr e WACCV VVkV VVk e ed ed ed d (±1TT) ()(11+=+ ir) (1+h)

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Where:

d PPr+ a1e 2±rt 1 ae +q±q lnpwqp

00.5st

st dds t 2 21

MIRRPV

PVr R In e y yy± pcPPe ae±rt wv

Present Value Table

Presentgvaluegofgygivevgpygsgrq

-n

Where r = discount rate

n = number of periods until payment

Discount rate (r)

Periods

(n) 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%

1 0·990 0·980 0·971 0·962 0·952 0·943 0·935 0·926 0·917 0·909 1

2 0·980 0·961 0·943 0·925 0·907 0·890 0·873 0·857 0·842 0·826 2

3 0·971 0·942 0·915 0·889 0·864 0·840 0·816 0·794 0·772 0·751 3

4 0·961 0·924 0·888 0·855 0·823 0·792 0·763 0·735 0·708 0·683 4

5 0·951 0·906 0·863 0·822 0·784 0·747 0·713 0·681 0·650 0·621 5

6 0·942 0·888 0·837 0·790 0·746 0·705 0·666 0·630 0·596 0·564 6

7 0·933 0·871 0·813 0·760 0·711 0·665 0·623 0·583 0·547 0·513 7

8 0·923 0·853 0·789 0·731 0·677 0·627 0·582 0·540 0·502 0·467 8

9 0·914 0·837 0·766 0·703 0·645 0·592 0·544 0·500 0·460 0·424 9

10 0·905 0·820 0·744 0·676 0·614 0·558 0·508 0·463 0·422 0·386 10

11 0·896 0·804 0·722 0·650 0·585 0·527 0·475 0·429 0·388 0·350 11

12 0·887 0·788 0·701 0·625 0·557 0·497 0·444 0·397 0·356 0·319 12

13 0·879 0·773 0·681 0·601 0·530 0·469 0·415 0·368 0·326 0·290 13

14 0·870 0·758 0·661 0·577 0·505 0·442 0·388 0·340 0·299 0·263 14

15 0·861 0·743 0·642 0·555 0·481 0·417 0·362 0·315 0·275 0·239 15

(n) 11% 12% 13 % 14% 15% 16% 17% 18% 19% 20%

1 0·901 0·893 0·885 0·877 0·870 0·862 0·855 0·847 0·840 0·833 1

2 0·812 0·797 0·783 0·769 0·756 0·743 0·731 0·718 0·706 0·694 2

3 0·731 0·712 0·693 0·675 0·658 0·641 0·624 0·609 0·593 0·579 3

4 0·659 0·636 0·613 0·592 0·572 0·552 0·534 0·516 0·499 0·482 4

5 0·593 0·567 0·543 0·519 0·497 0·476 0·456 0·437 0·419 0·402 5

6 0·535 0·507 0·480 0·456 0·432 0·410 0·390 0·370 0·352 0·335 6

7 0·482 0·452 0·425 0·400 0·376 0·354 0·333 0·314 0·296 0·279 7

8 0·434 0·404 0·376 0·351 0·327 0·305 0·285 0·266 0·249 0·233 8

9 0·391 0·361 0·333 0·308 0·284 0·263 0·243 0·225 0·209 0·194 9

10 0·352 0·322 0·295 0·270 0·247 0·227 0·208 0·191 0·176 0·162 10

11 0·317 0·287 0·261 0·237 0·215 0·195 0·178 0·162 0·148 0·135 11

12 0·286 0·257 0·231 0·208 0·187 0·168 0·152 0·137 0·124 0·112 12

13 0·258 0·229 0·204 0·182 0·163 0·145 0·130 0·116 0·104 0·093 13

14 0·232 0·205 0·181 0·160 0·141 0·125 0·111 0·099 0·088 0·078 14

15 0·209 0·183 0·160 0·140 0·123 0·108 0·095 0·084 0·074 0·065 15

ww.&r)r%r

AnnuityggTable

Present value of an annuity of 1 i.e.

WhereVrV=VdiscountVrate

VVnV=VnumberVofVperiods

Discount rate (r)

Periods

(n) 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%V

VqVp∑yypV p∑yxpVp∑ywqVp∑yvrV p∑yurVp∑ytsVp∑ysuV p∑yrvVp∑yqwVp∑ypyV q

VrVq∑ywpV q∑ytrVq∑yqsVq∑xxvV q∑xuyVq∑xssVq∑xpxV q∑wxsVq∑wuyVq∑wsvV r

VsVr∑ytqV r∑xxtVr∑xryVr∑wwuV r∑wrsVr∑vwsVr∑vrtV r∑uwwVr∑usqVr∑txwV s

VtVs∑yprV s∑xpxVs∑wqwVs∑vspV s∑utvVs∑tvuVs∑sxwV s∑sqrVs∑rtpVs∑qwpV t

VuVt∑xusV t∑wqsVt∑uxpVt∑turV t∑sryVt∑rqrVt∑qppV s∑yysVs∑xypVs∑wyqV u

VvVu∑wyuV u∑vpqVu∑tqwVu∑rtrV u∑pwvVt∑yqwVt∑wvwV t∑vrsVt∑txvVt∑suuV v

VwVv∑wrxV v∑twrVv∑rspVv∑pprV u∑wxvVu∑uxrVu∑sxyV u∑rpvVu∑pssVt∑xvxV w

VxVw∑vurV w∑sruVw∑prpVv∑wssV v∑tvsVv∑rqpVu∑ywqV u∑wtwVu∑usuVu∑ssuV x

VyVx∑uvvV x∑qvrVw∑wxvVw∑tsuV w∑qpxVv∑xprVv∑uquV v∑rtwVu∑yyuVu∑wuyV y

VqpVy∑twqVx∑yxsVx∑uspVx∑qqqV w∑wrrVw∑svpVw∑prtV v∑wqpVv∑tqxVv∑qtuV qp

VqqVqp∑svxVy∑wxwVy∑rusVx∑wvpV x∑spvVw∑xxwVw∑tyyV w∑qsyVv∑xpuVv∑tyuV qq

VqrVqq∑ruuVqp∑uwuVy∑yutVy∑sxuV x∑xvsVx∑sxtVw∑ytsV w∑usvVw∑qvqVv∑xqtV qr

VqsVqr∑qstVqq∑stxVqp∑vsuVy∑yxvV y∑sytVx∑xusVx∑suxV w∑yptVw∑txwVw∑qpsV qs

VqtVqs∑pptVqr∑qpvVqq∑ryvVqp∑uvsV y∑xyyVy∑ryuVx∑wtuV x∑rttVw∑wxvVw∑svwV qt

VquVqs∑xvuVqr∑xtyVqq∑ysxVqq∑qqxV qp∑sxpVy∑wqrVy∑qpxV x∑uuyVx∑pvqVw∑vpvV qu

(n) 11% 12% 13 % 14% 15% 16% 17% 18% 19% 20%V

VqVp∑ypqV p∑xysVp∑xxuVp∑xwwV p∑xwpVp∑xvrVp∑xuuV p∑xtwVp∑xtpVp∑xssV q

VrVq∑wqsV q∑vypVq∑vvxVq∑vtwV q∑vrvVq∑vpuVq∑uxuV q∑uvvVq∑utwVq∑urxV r

VsVr∑tttV r∑tprVr∑svqVr∑srrV r∑rxsVr∑rtvVr∑rqpV r∑qwtVr∑qtpVr∑qpvV s

VtVs∑qprV s∑pswVr∑ywtVr∑yqtV r∑xuuVr∑wyxVr∑wtsV r∑vypVr∑vsyVr∑uxyV t

VuVs∑vyvV s∑vpuVs∑uqwVs∑tssV s∑surVs∑rwtVs∑qyyV s∑qrwVs∑puxVr∑yyqV u

VvVt∑rsqV t∑qqqVs∑yyxVs∑xxyV s∑wxtVs∑vxuVs∑uxyV s∑tyxVs∑tqpVs∑srvV v

VwVt∑wqrV t∑uvtVt∑trsVt∑rxxV t∑qvpVt∑psyVs∑yrrV s∑xqrVs∑wpvVs∑vpuV w

VxVu∑qtvV t∑yvxVt∑wyyVt∑vsyV t∑txwVt∑sttVt∑rpwV t∑pwxVs∑yutVs∑xswV x

VyVu∑uswV u∑srxVu∑qsrVt∑ytvV t∑wwrVt∑vpwVt∑tuqV t∑spsVt∑qvsVt∑psqV y

VqpVu∑xxyVu∑vupVu∑trvVu∑rqvV u∑pqyVt∑xssVt∑vuyV t∑tytVt∑ssyVt∑qyrV qp

VqqVv∑rpwVu∑ysxVu∑vxwVu∑tusV u∑rstVu∑pryVt∑xsvV t∑vuvVt∑txvVt∑srwV qq

VqrVv∑tyrVv∑qytVu∑yqxVu∑vvpV u∑trqVu∑qywVt∑yxxV t∑wysVt∑vqqVt∑tsyV qr

VqsVv∑wupVv∑trtVv∑qrrVu∑xtrV u∑uxsVu∑strVu∑qqxV t∑yqpVt∑wquVt∑ussV qs

VqtVv∑yxrVv∑vrxVv∑sprVv∑pprV u∑wrtVu∑tvxVu∑rryV u∑ppxVt∑xprVt∑vqqV qt

VquVw∑qyqVv∑xqqVv∑tvrVv∑qtrV u∑xtwVu∑uwuVu∑srtV u∑pyrVt∑xwvVt∑vwuV qu

ggg g

VqV-VhqVkVri

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4!.$!2$ ./2-!, $)342)"54)/. 4!",%

0·000·010·02 0·030·040·05 0·060·070·08 0·09

0·00·0000 0·00400·00800·0120 0·01600·01990·0239 0·02790·03190·0359

0·10·0398 0·04380·04780·0517 0·05570·05960·0636 0·06750·07140·0753

0·20·0793 0·08320·08710·0910 0·09480·09870·1026 0·10640·11030·1141

0·30·1179 0·12170·12550·1293 0·13310·13680·1406 0·14430·14800·1517

0·40·1554 0·15910·16280·1664 0·17000·17360·1772 0·18080·18440·1879

0·50·1915 0·19500·19850·2019 0·20540·20880·2123 0·21570·21900·2224

0·60·2257 0·22910·23240·2357 0·23890·24220·2454 0·24860·25170·2549

0·70·2580 0·26110·26420·2673 0·27040·27340·2764 0·27940·28230·2852

0·80·2881 0·29100·29390·2967 0·29950·30230·3051 0·30780·31060·3133

0·90·3159 0·31860·32120·3238 0·32640·32890·3315 0·33400·33650·3389

1·00·3413 0·34380·34610·3485 0·35080·35310·3554 0·35770·35990·3621

1·10·3643 0·36650·36860·3708 0·37290·37490·3770 0·37900·38100·3830

1·20·3849 0·38690·38880·3907 0·39250·39440·3962 0·39800·39970·4015

1·30·4032 0·40490·40660·4082 0·40990·41150·4131 0·41470·41620·4177

1·40·4192 0·42070·42220·4236 0·42510·42650·4279 0·42920·43060·4319

1·50·4332 0·43450·43570·4370 0·43820·43940·4406 0·44180·44290·4441

1·60·4452 0·44630·44740·4484 0·44950·45050·4515 0·45250·45350·4545

1·70·4554 0·45640·45730·4582 0·45910·45990·4608 0·46160·46250·4633

1·80·4641 0·46490·46560·4664 0·46710·46780·4686 0·46930·46990·4706

1·90·4713 0·47190·47260·4732 0·47380·47440·4750 0·47560·47610·4767

2·00·4772 0·47780·47830·4788 0·47930·47980·4803 0·48080·48120·4817

2·10·4821 0·48260·48300·4834 0·48380·48420·4846 0·48500·48540·4857

2·20·4861 0·48640·48680·4871 0·48750·48780·4881 0·48840·48870·4890

2·30·4893 0·48960·48980·4901 0·49040·49060·4909 0·49110·49130·4916

2·40·4918 0·49200·49220·4925 0·49270·49290·4931 0·49320·49340·4936

2·50·4938 0·49400·49410·4943 0·49450·49460·4948 0·49490·49510·4952

2·60·4953 0·49550·49560·4957 0·49590·49600·4961 0·49620·49630·4964

2·70·4965 0·49660·49670·4968 0·49690·49700·4971 0·49720·49730·4974

2·80·4974 0·49750·49760·4977 0·49770·49780·4979 0·49790·49800·4981

2·90·4981 0·49820·49820·4983 0·49840·49840·4985 0·49850·49860·4986

3·00·4987 0·49870·49870·4988 0·49880·49890·4989 0·49890·49900·4990

This table can be used to calculate ($), the cumulative normal distribution functions needed for the Black-Scholes model

of option pricing. If $ > 0, add 0·5 to the relevant number above. If $ < 0, subtract the relevant number above from 0·5.

End of Question Paper

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