AQA_A Level Business Studies Paper 2_2020

AQA_A Level Business Studies Paper 2_2020 A-level BUSINESS Paper 2 Business 2 Monday 1 June 2020 Afternoon Time allowed: 2 hours Materials For this paper you must have: • a calculator. Instructions • Use black ink or black ball-point pen. • Fill in the boxes at the top of this page. • Answer all questions. • You must answer the questions in the spaces provided. Do not write outside the box around each page or on blank pages. • Do all rough work in this answer book. Cross through any work you do not want to be marked. Information • The marks for questions are shown in brackets. • The maximum mark for this paper is 100. Answer all questions in the spaces provided. 0 1 Read the information below and then answer the questions that follow. Drake Hotels PLC owns 20 budget hotels in the UK. Each one is located in a different city. The industry is very competitive and Drake’s managers all have an objective to help the business to be as efficient as possible. Drake Hotels PLC’s operating profit for the financial year 2019–20 was £18 million. Last month the company appointed a new Chief Executive, Mary Myers, to increase the profitability of the business. Mary was previously the Marketing Manager of an upmarket hotel chain. Mary is already considering an investment proposal for a luxury hotel in Oxford. This hotel would target overseas visitors who might want to visit the city. Drake Hotels has found a suitable building but needs to invest to develop it. Appendix A Investment appraisal results for the proposed investment into a new hotel in Oxford (based on net inflows for first eight years). Average rate of return 12% per year Net Present Value £25 million Source: Chief Executive Appendix B Sensitivity analysis for the new Oxford hotel investment proposal Two possible changes in the economy that might affect Estimated the investment appraisal results in Appendix A probability of this change happening The value of the pound against other currencies is 10% 20% higher than originally forecasted. The average GDP growth in overseas countries is 1.5% 30% higher than originally forecasted. Source: Chief Executive Appendix C Selected financial data for Drake Hotels PLC box £ million as at 1 May 2020 Current assets 15 Current liabilities 18 Total equity 170 Non-current liabilities 280 Appendix D Forecasted data for Drake Hotels PLC’s new Oxford hotel investment proposal Initial investment required Estimated income elasticity of demand £20 million +2 Percentage of customers visiting from overseas 70% Estimated cost of borrowing for this investment 8% per annum Appendix E Room bookings by month and day of the week in Drake Hotels PLC’s budget hotels 2019 Turn over ► box . Use Appendix B to explain one reason why Drake Hotels PLC has used sensitivity analysis for the investment proposal. [4 marks]