FIN4801
EXAM PACK
FOR ASSISTANCE WITH THIS MODULE +27 67 171 1739
, UNIVERSITY EXAMINATIONS
MAY/ JUNE 2025
FIN4801
Advanced Financial Management
100 Marks
Duration: 4 Hours
Examiners:
Primary: Dr. P.N. Kotze Secondary : Mr. A.M. Phenya
External examiner: Dr. J.S. Kasozi
Instructions:
This paper consists of 12 pages, plus appendix A (financial tables) on pages 9 to 12.
This examination is an assessment. It should therefore be your own work and you must
remember to tick the Declaration of Honesty.
Plagiarism checks will be run on your submission on Turnitin and the invigilator
application. In addition, manual checks will be done.
Your answers must be typed. You can use + - / * and ( ) as your mathematical operators
where necessary. You do not need to use the equation editor.
Remember to save your file as a PDF before submitting it.
Start submitting it as soon as the writing time for the paper has stopped (after the four
hours). Do not use your upload time to answer the paper.
Ensure that your answers are uploaded on time.
Contact us immediately if you are experiencing any issues with uploading or during the
examination.
Answer all the questions.
Show all your calculations clearly and label your answers.
Submit your answers on myExams and make sure to utilise the Invigilator application as
per the instructions, it is compulsory.
,CONFIDENTIAL FIN4801
Page 2 of 12 MAY/ JUNE 2025
[TURN OVER]
, CONFIDENTIAL FIN4801
Page 3 of 12 MAY/ JUNE 2025
QUESTION 1 [10 Marks]
You were recently employed as an analyst and are tasked to determine the capital structure
plans followed by industrial companies involved in the packing of foods. The debt ratios of the
three companies are shown below for the past five years while the risk-free rate, the cost of a
government bond, is also shown:
Cost of debt, 2020 to 2025
160%
150%
140%
120% 120%
100% 100% 100% 100%
90%
80% 80%
60% 60% 60%
50% 50% 50% 50% 50%
40%
20% 20%
4% 3% 4% 5% 6%
5%
0%
2020 2021 2022 2023 2024 2025
Fishpack Meatpack Chickenpack Gov bond rate
Required:
Provide a discussion and argument of how all three companies change their capital structures
in response to changes in borrowing costs. Refer to specific details in the above chart and to
specific capital structure theories or capital structure policies (for example target structures).
QUESTION 2 [35 Marks]
Question 2.1 (27 Marks)
Steel Ltd., a steel manufacturer is considering a new project, namely expansion into
construction machinery manufacturing. The company wishes to diversify operations but has
concerns about the potential profitability of the project, the risk thereof and the impact of
uncertain inflation expectations. It is expected that the risk profile of the new division would be
similar to that of current players in the construction machinery sector.
[TURN OVER]
EXAM PACK
FOR ASSISTANCE WITH THIS MODULE +27 67 171 1739
, UNIVERSITY EXAMINATIONS
MAY/ JUNE 2025
FIN4801
Advanced Financial Management
100 Marks
Duration: 4 Hours
Examiners:
Primary: Dr. P.N. Kotze Secondary : Mr. A.M. Phenya
External examiner: Dr. J.S. Kasozi
Instructions:
This paper consists of 12 pages, plus appendix A (financial tables) on pages 9 to 12.
This examination is an assessment. It should therefore be your own work and you must
remember to tick the Declaration of Honesty.
Plagiarism checks will be run on your submission on Turnitin and the invigilator
application. In addition, manual checks will be done.
Your answers must be typed. You can use + - / * and ( ) as your mathematical operators
where necessary. You do not need to use the equation editor.
Remember to save your file as a PDF before submitting it.
Start submitting it as soon as the writing time for the paper has stopped (after the four
hours). Do not use your upload time to answer the paper.
Ensure that your answers are uploaded on time.
Contact us immediately if you are experiencing any issues with uploading or during the
examination.
Answer all the questions.
Show all your calculations clearly and label your answers.
Submit your answers on myExams and make sure to utilise the Invigilator application as
per the instructions, it is compulsory.
,CONFIDENTIAL FIN4801
Page 2 of 12 MAY/ JUNE 2025
[TURN OVER]
, CONFIDENTIAL FIN4801
Page 3 of 12 MAY/ JUNE 2025
QUESTION 1 [10 Marks]
You were recently employed as an analyst and are tasked to determine the capital structure
plans followed by industrial companies involved in the packing of foods. The debt ratios of the
three companies are shown below for the past five years while the risk-free rate, the cost of a
government bond, is also shown:
Cost of debt, 2020 to 2025
160%
150%
140%
120% 120%
100% 100% 100% 100%
90%
80% 80%
60% 60% 60%
50% 50% 50% 50% 50%
40%
20% 20%
4% 3% 4% 5% 6%
5%
0%
2020 2021 2022 2023 2024 2025
Fishpack Meatpack Chickenpack Gov bond rate
Required:
Provide a discussion and argument of how all three companies change their capital structures
in response to changes in borrowing costs. Refer to specific details in the above chart and to
specific capital structure theories or capital structure policies (for example target structures).
QUESTION 2 [35 Marks]
Question 2.1 (27 Marks)
Steel Ltd., a steel manufacturer is considering a new project, namely expansion into
construction machinery manufacturing. The company wishes to diversify operations but has
concerns about the potential profitability of the project, the risk thereof and the impact of
uncertain inflation expectations. It is expected that the risk profile of the new division would be
similar to that of current players in the construction machinery sector.
[TURN OVER]
