,Editionl4,lVersionl1
ISBNl978-1-84808-324-0
Publishedlby
GetlThroughlGuideslLtd.l6
5lBedfordlStreetlSouthlLe
icesterlLE1l3JRlUnitedlKi
ngdom
Website:lwww.GetThroughGuides.com
Email:
Onlinelcontentlfeedbacklform:lhttp://gtgtraining.com/studymaterialfeedback/lF
orlsuggestions:
StudentlSupportlForum:lhttp://GetthroughGuides.co.uk/forum
ThelpublisherlislgratefulltolthelAssociationloflCharteredlCertifiedlAccountantslforlpermissionltolreproducelpastlexami
nationlquestionslandltheirlanswers.
Limitloflliabilityl/lDisclaimerloflwarranty:lWhilelthelpublisherlhaslusedlitslbestleffortslinlpreparinglthislbook,litlmakeslnol
warrantieslorlrepresentationslwithlrespectltolthelaccuracylorlcompletenessloflcontentsloflthislbooklandlspecificallyldis
claimslanylimpliedlwarrantiesloflmerchantabilitylorlfitnesslforlanylspecificlorl generallpurpose.lNolwarrantylmaylbelcre
atedlorlextendedlbyl salesl orl otherl representativesl orl writtenl saleslmaterial.lEachlcompanylisldifferentlandlthelsu
ggestionslmadelinl thisl bookl mayl notl suitl al particularlpurpose.lCompanies/individualslshouldlconsultlprofessiona
lslwherelappropriate.lThelpublisherlshalllnotlbelliablelforlanyllossloflprofitlorlotherlcommercialldamageslincludinglbutl
notllimitedltolspecial,lincidental,lconsequentiallorlotherldamages.
Alllrightslreserved.lNolpartloflthislpublicationlmaylbelreproduced,lstoredlinlalretrievallsystemlorltransmitted,linlanyl for
ml orl byl anyl means,l electronic,l mechanical,l photocopying,l scanningl orl otherwise,l withoutl thel priorlwrittenlpermi
ssionloflGetlThroughlGuideslLtd.
Nolresponsibilitylforlanyllossltolanyonelactinglorlrefraininglfromlactionlaslalresultloflanylmateriallinlthislpublicationlcanl
belacceptedlbylthelauthor,leditorlorlpublisher.
Pleaselchecklthelbackloflthislbooklforlanylupdatesl/lerrata.lFurtherllivelupdatesl/lerratalmaylalsolbelfoundlonlinelonlthel
GetlThroughlGuideslStudentlSupportlForumlat:lhttp://getthroughguides.co.uk/forum.lStudentslareladvisedltolchecklb
othloflthesellocations.
©lGetlThroughlGuidesl2012
, Aboutlthelpaper i - v
Questionl
Topic Name Marks PagelNumbers
number
Questionl Solutionl
bank bank
Section A l
FinanciallManagementlFunction
1 10 1l-l1 59l-l59
EPSlandlShareholderlwealthl
2 JJGlCo 25 1l-l2 60l–l62
maximisation
3 Multiplelstakeholders 10 2l-l2 63l-l64
Section B l FinanciallManagementlEnvironment
4 Financiallmanagementlenvironment Tagna 25 3l-l3 65l–l66
5 Financiallintermediary 10 4l-l4 67l-l67
6 Roleloflfinanciallintermediaries APXlCo 25 4l-l5 68l-l70
7 Bankslandlmoneylmarkets 10 5l-l5 71l-l71
Section C l WorkinglCapitallManagement
8 EOQlandlreceivableslmanagement AsifcolInc 25 7l-l8 73l–l75
9 FactoringlandlInvoiceldiscounting HudsonlLtd 25 8l-l8 76l–l78
Workinglcapitallmanagementlandlf
10 AnjolLtd 25 9l-l10 78l–l 80
actoring
11 Foreignlreceivableslmanagement SprinterlPlc 25 10l–l11 80l–l81
12 Discountlpolicylforlpromptlpayment AreslLtd 25 11l–l12 82l–l83
13 Earlylsettlementldiscount PNPlLtd 25 12l–l12 83l–l85
14 Earlylsettlementldiscount VelmlCo 25 13l–l13 85l–l87
15 CashlbudgetlandlBaumollmodel ThornelCo 25 14l-l14 88l–l89
16 EOQlandlFactoring FLGlCo 25 14l–l15 90l–l94
17 Overtradinglandlfactoring DoelLtd 25 15l–l16 94l–l97
EOQl&lhedginglforeignlaccountslp
17 PKAlCo 25 17l–l17 97l–l100
ayable
19 EOQlmodel TNGlCo 25 17l–l18 100l–l102
Section D l InvestmentlAppraisal
20 Proposedlinvestmentl-lNPVlandlIRR CharmlInc 25 19l–l19 103l–l105
21 Specificlinvestmentldecisionl-lNPV LeamingerlInc 25 20l–l20 105l–l108
22 NPVlandlIRR PVlCo 25 21l-l21 108l–l110
23 NPVlandlIRR DuolCo 25 21l-l22 111l–l113
24 Proposedlinvestmentl-lNPVlandlIRR ParadiselLtd 25 22l-l23 113l–l115
25 NPVlandlprojectlevaluationlstages BasrillInc 25 23l–l24 115l–l117
26 Netlpresentlvalue PainlesslCo 25 24l–l24 117l–l118
Bramblingl(Electronicsl
27 Sensitivitylanalysis 25 25l–l25 118l–l120
Ltd)
28 Sensitivitylanalysis UmunatlLtd 25 26l-l26 120l–l122
29 NPVlandlProposedlInvestment SClCo 25 26l-l27 122l–l124
30 3Financinglcashlflows ASOPlCo 25 27l-l27 125l–l127
, Section E l
BusinesslFinance
Financelforlsmalllandlmediumlsizedle
31 LavinialproductslLtd 25 29l-l30 129l–l131
ntities
32 Rightslissue SmithlLtd 25 30l-l30 131l–l134
Evaluationloflalnewlfinanciallproposal
33 ArwinlLtd 25 31l-l31 134l–l138
34 Sourcesloflfinance McTeelPlc 25 32l-l33 138l–l141
35 Rightslissueloflshares TranscolLtd 25 33l–l33 141l–l143
36 Evaluationloflsourcesloflfinance EcholCo 25 33l–l34 143l–l147
37 Sourcesloflfinance TirwenlLtd 25 35l-l35 147l–l150
38 Ratiolanalysislandlsourcesloflfinance TFRlLtd 25 36l–l36 150l–l152
39 Shortltermlfinance 10 36l–l36 153l–l153
40 Islamiclfinance 20 36l-l36 154l–l155
41 DividendlPolicy AnafilCo 25 37l-l37 155l–l156
Section F l CostloflCapital
42 ModiglianilMillerl&lcapitallstructure NereuslandlJanuslLtd 25 39l–l39 157l–l158
43 Costloflcapital PirinlCo 25 40l–l41 158l–l160
44 ModiglianilMillerl&lcostloflcapital GurwinlLtd 25 41l–l42 161l–l162
45 Capitallassetlpricinglmodell(CAPM) RupablCo 25 42l–l42 162l–l164
46 Costloflcapital SelwynlLtd 25 42l-l43 164l–l165
Weightedlaveragelcostloflcapitall(
47 PolstronlLtd 25 43l-l43 166l–l168
WACC)
48 Capitallstructure ReliablelLtd 25 44l-l44 168l–l171
49 Costloflcapitallandldividendlpolicy DDlCo 25 45l-l45 172l-l174
Section G l BusinesslValuations
50 Businesslvaluations GreenwoodlLtd 25 47l–l47 175l–l177
StanziallInclandl
51 Valuationlmethod 25 48l–l49 177l–l180
BesserlotlLtd
OaktonlInclandl
52 Businesslvaluation 25 49l-l50 180l–l182
MallardlInc
53 Valuationloflshares SomervillelLtd 25 50l-l51 183l–l184
OlivinelLtdlandlHalitelL
54 Businesslvaluations 25 52l–l53 184l–l186
td
Valuationloflbusiness/convertiblelbon PhobislColandl
55 25 53l-l53 186l-l189
d DanocalCo
56 Valuationloflconvertibleldebentures Techfools.com 25 54l-l54 189l–l191
ISBNl978-1-84808-324-0
Publishedlby
GetlThroughlGuideslLtd.l6
5lBedfordlStreetlSouthlLe
icesterlLE1l3JRlUnitedlKi
ngdom
Website:lwww.GetThroughGuides.com
Email:
Onlinelcontentlfeedbacklform:lhttp://gtgtraining.com/studymaterialfeedback/lF
orlsuggestions:
StudentlSupportlForum:lhttp://GetthroughGuides.co.uk/forum
ThelpublisherlislgratefulltolthelAssociationloflCharteredlCertifiedlAccountantslforlpermissionltolreproducelpastlexami
nationlquestionslandltheirlanswers.
Limitloflliabilityl/lDisclaimerloflwarranty:lWhilelthelpublisherlhaslusedlitslbestleffortslinlpreparinglthislbook,litlmakeslnol
warrantieslorlrepresentationslwithlrespectltolthelaccuracylorlcompletenessloflcontentsloflthislbooklandlspecificallyldis
claimslanylimpliedlwarrantiesloflmerchantabilitylorlfitnesslforlanylspecificlorl generallpurpose.lNolwarrantylmaylbelcre
atedlorlextendedlbyl salesl orl otherl representativesl orl writtenl saleslmaterial.lEachlcompanylisldifferentlandlthelsu
ggestionslmadelinl thisl bookl mayl notl suitl al particularlpurpose.lCompanies/individualslshouldlconsultlprofessiona
lslwherelappropriate.lThelpublisherlshalllnotlbelliablelforlanyllossloflprofitlorlotherlcommercialldamageslincludinglbutl
notllimitedltolspecial,lincidental,lconsequentiallorlotherldamages.
Alllrightslreserved.lNolpartloflthislpublicationlmaylbelreproduced,lstoredlinlalretrievallsystemlorltransmitted,linlanyl for
ml orl byl anyl means,l electronic,l mechanical,l photocopying,l scanningl orl otherwise,l withoutl thel priorlwrittenlpermi
ssionloflGetlThroughlGuideslLtd.
Nolresponsibilitylforlanyllossltolanyonelactinglorlrefraininglfromlactionlaslalresultloflanylmateriallinlthislpublicationlcanl
belacceptedlbylthelauthor,leditorlorlpublisher.
Pleaselchecklthelbackloflthislbooklforlanylupdatesl/lerrata.lFurtherllivelupdatesl/lerratalmaylalsolbelfoundlonlinelonlthel
GetlThroughlGuideslStudentlSupportlForumlat:lhttp://getthroughguides.co.uk/forum.lStudentslareladvisedltolchecklb
othloflthesellocations.
©lGetlThroughlGuidesl2012
, Aboutlthelpaper i - v
Questionl
Topic Name Marks PagelNumbers
number
Questionl Solutionl
bank bank
Section A l
FinanciallManagementlFunction
1 10 1l-l1 59l-l59
EPSlandlShareholderlwealthl
2 JJGlCo 25 1l-l2 60l–l62
maximisation
3 Multiplelstakeholders 10 2l-l2 63l-l64
Section B l FinanciallManagementlEnvironment
4 Financiallmanagementlenvironment Tagna 25 3l-l3 65l–l66
5 Financiallintermediary 10 4l-l4 67l-l67
6 Roleloflfinanciallintermediaries APXlCo 25 4l-l5 68l-l70
7 Bankslandlmoneylmarkets 10 5l-l5 71l-l71
Section C l WorkinglCapitallManagement
8 EOQlandlreceivableslmanagement AsifcolInc 25 7l-l8 73l–l75
9 FactoringlandlInvoiceldiscounting HudsonlLtd 25 8l-l8 76l–l78
Workinglcapitallmanagementlandlf
10 AnjolLtd 25 9l-l10 78l–l 80
actoring
11 Foreignlreceivableslmanagement SprinterlPlc 25 10l–l11 80l–l81
12 Discountlpolicylforlpromptlpayment AreslLtd 25 11l–l12 82l–l83
13 Earlylsettlementldiscount PNPlLtd 25 12l–l12 83l–l85
14 Earlylsettlementldiscount VelmlCo 25 13l–l13 85l–l87
15 CashlbudgetlandlBaumollmodel ThornelCo 25 14l-l14 88l–l89
16 EOQlandlFactoring FLGlCo 25 14l–l15 90l–l94
17 Overtradinglandlfactoring DoelLtd 25 15l–l16 94l–l97
EOQl&lhedginglforeignlaccountslp
17 PKAlCo 25 17l–l17 97l–l100
ayable
19 EOQlmodel TNGlCo 25 17l–l18 100l–l102
Section D l InvestmentlAppraisal
20 Proposedlinvestmentl-lNPVlandlIRR CharmlInc 25 19l–l19 103l–l105
21 Specificlinvestmentldecisionl-lNPV LeamingerlInc 25 20l–l20 105l–l108
22 NPVlandlIRR PVlCo 25 21l-l21 108l–l110
23 NPVlandlIRR DuolCo 25 21l-l22 111l–l113
24 Proposedlinvestmentl-lNPVlandlIRR ParadiselLtd 25 22l-l23 113l–l115
25 NPVlandlprojectlevaluationlstages BasrillInc 25 23l–l24 115l–l117
26 Netlpresentlvalue PainlesslCo 25 24l–l24 117l–l118
Bramblingl(Electronicsl
27 Sensitivitylanalysis 25 25l–l25 118l–l120
Ltd)
28 Sensitivitylanalysis UmunatlLtd 25 26l-l26 120l–l122
29 NPVlandlProposedlInvestment SClCo 25 26l-l27 122l–l124
30 3Financinglcashlflows ASOPlCo 25 27l-l27 125l–l127
, Section E l
BusinesslFinance
Financelforlsmalllandlmediumlsizedle
31 LavinialproductslLtd 25 29l-l30 129l–l131
ntities
32 Rightslissue SmithlLtd 25 30l-l30 131l–l134
Evaluationloflalnewlfinanciallproposal
33 ArwinlLtd 25 31l-l31 134l–l138
34 Sourcesloflfinance McTeelPlc 25 32l-l33 138l–l141
35 Rightslissueloflshares TranscolLtd 25 33l–l33 141l–l143
36 Evaluationloflsourcesloflfinance EcholCo 25 33l–l34 143l–l147
37 Sourcesloflfinance TirwenlLtd 25 35l-l35 147l–l150
38 Ratiolanalysislandlsourcesloflfinance TFRlLtd 25 36l–l36 150l–l152
39 Shortltermlfinance 10 36l–l36 153l–l153
40 Islamiclfinance 20 36l-l36 154l–l155
41 DividendlPolicy AnafilCo 25 37l-l37 155l–l156
Section F l CostloflCapital
42 ModiglianilMillerl&lcapitallstructure NereuslandlJanuslLtd 25 39l–l39 157l–l158
43 Costloflcapital PirinlCo 25 40l–l41 158l–l160
44 ModiglianilMillerl&lcostloflcapital GurwinlLtd 25 41l–l42 161l–l162
45 Capitallassetlpricinglmodell(CAPM) RupablCo 25 42l–l42 162l–l164
46 Costloflcapital SelwynlLtd 25 42l-l43 164l–l165
Weightedlaveragelcostloflcapitall(
47 PolstronlLtd 25 43l-l43 166l–l168
WACC)
48 Capitallstructure ReliablelLtd 25 44l-l44 168l–l171
49 Costloflcapitallandldividendlpolicy DDlCo 25 45l-l45 172l-l174
Section G l BusinesslValuations
50 Businesslvaluations GreenwoodlLtd 25 47l–l47 175l–l177
StanziallInclandl
51 Valuationlmethod 25 48l–l49 177l–l180
BesserlotlLtd
OaktonlInclandl
52 Businesslvaluation 25 49l-l50 180l–l182
MallardlInc
53 Valuationloflshares SomervillelLtd 25 50l-l51 183l–l184
OlivinelLtdlandlHalitelL
54 Businesslvaluations 25 52l–l53 184l–l186
td
Valuationloflbusiness/convertiblelbon PhobislColandl
55 25 53l-l53 186l-l189
d DanocalCo
56 Valuationloflconvertibleldebentures Techfools.com 25 54l-l54 189l–l191
