ANSWER ALL QUESTIONS IN THIS PAPER

Please write down the correct LETTER next to the relevant question number. Eg$.26.$ F

QUESTION $1(4$ Marks$)$

Which ONE of the following statements is TRUE?

A$.$ In management accounting, reports tend to be general$-$purpose useful to a wide range of users.

B$.$ Debentures are short term debts for companies.

C$.$ In financial accounting, objective and verifiable information is needed to prepare reports.

D$.$ The interest rate on mortgage bonds is fixed.

QUESTION $2(4$ Marks$)$

Shelford distributors$$ normal credit terms to Landry Stores are $25$ days but is prepared to allow a $2\mathrm{.}3\%$ discount if

Landry Stores pays the account within $4$ days. Calculate the cost to Landry Stores of not accepting the discount.

A$.45\mathrm{.}8\%$

B$.40\mathrm{.}9\%$

C$.42\mathrm{.}7\%$

D$.38\mathrm{.}3\%$

QUESTION $3(4$ Marks$)$

Which ONE of the following statements is FALSE?

A$.$ A beta coefficient tells us how much systematic risk a particular asset has relative to an average asset.

B$.$ A high beta coefficient means that the asset is heavily affected by market changes.

C$.$ The Capital Asset Pricing Model $($CAPM$)$ allows investors to determine the required rate of return on a share, based

on the risk associated with that share.

D$.$ A low beta coefficient implies high variance.

QUESTION $4(4$ Marks$)$

The cost of equity, RE for a company is $14\%.$ If the company has a market return of $10\%$ and a beta factor of $2\mathrm{.}2,$ the

risk free return is:

A$.6\mathrm{.}7\%$

B$.5\mathrm{.}9\%$

C$.6\mathrm{.}1\%$

D$.7\mathrm{.}2\%$

QUESTION $5(4$ Marks$)$

Suppose a company, Scalar Solar Panels paid a dividend of R $1\mathrm{.}25$ on the current market price and its preference

share of R $10\mathrm{.}60.$ The cost of preference shares, RP$,$ is:

A$.11\mathrm{.}0\%$

B$.10\mathrm{.}4\%$

C$.13\mathrm{.}1\%$

D$.11\mathrm{.}8\%$

QUESTION $6(4$ Marks$)$

If a firm is fixed in term of its assets and operations and it only considers possible changes in the debt$/$equity ratio, the

firm is following:

A$.$ taxation theory.

B$.$ variability theory.

C$.$ debt theory.

D$.$ static theory.

QUESTION $7(4$ Marks$)$

Faadil holds $24\%$ of the shares $($R $660000)$ in Jacobs Limited. The new project has gone ahead, EPS is $18$ cents, and

share price is R $1.$ His investment is:

A$.$ R $26592$

B$.$ R $28512$

C$.$ R $27785$

D$.$ R $28904$

QUESTION $8(4$ Marks$)$

A firm becomes bankrupt$/$insolvent when the:

A$.$ income generated is less than expenses.

B$.$ profit is zero.

C$.$ value of its debt is equal to the value of its income.

D$.$ value of its assets is equal to the value of its debt.

QUESTION $9(4$ Marks$)$

Which statement is TRUE?

A$.$ In a spot trade, the transaction will be completed within $12$ months.

B$.$ In a forward trade, there is an agreement to exchange currency at some time in the future.

C$.$ Spot trade is equal to forward trade in terms of currencies.

D$.$ Companies enter spot trades based on their opinion of where exchange rates are headed.

QUESTION $10(4$ Marks$)$

Suppose you were expecting to receive a million New Zealand Dollars $($NZD$)$ in three months, and you agree to

forward trade to exchange your NZD$$s for Rands. Assume that the spot exchange rate and the $90-$day forward rate in

terms of Rand per NZD are R $11\mathrm{.}420=1$ NZD and R $11\mathrm{.}650=1$ NZD$,$ respectively. The premium relative of the NZD to

the Rand is:

A$.2\mathrm{.}01\%$

B$.2\mathrm{.}14\%$

C$.1\mathrm{.}98\%$

D$.2\mathrm{.}22\%$

QUESTION $11(4$ Marks$)$

The current war in Ukraine is an example of a:

A$.$ local risk.

B$.$ government intervention risk.

C$.$ political risk.

D$.$ variable risk.

Questions $1220$ refer to the problem below.

Caleb Energy, South Africa, is a specialist manufacturer of inverters. In seeking to expand its operations, it is given

the opportunity to acquire a Norwegian subsidiary company, OSLO International, or set up a new division in its home

market. The relevant figures for these two options are given below:

Set up new division at home:

Rand Cost of setting up premises R $10000000$

Cost of machinery R $7000000$

Annual sales R $8500000$

Annual variable cost R $4000000$

Additional head office expenses R $3000000$

The project is expected to last for $7$ years. Caleb Energy, current cost of capital is $10\%.$

Acquisition:

Acquire shares from existing shareholders $6000000$ Krone

Redundancy costs $3000000$ Krone

Annual Sales $10500000$ Krone

Annual variable costs $4500000$ Krone

Annual fixed costs $3500000$ Krone

Additional information: The Norwegian inflation is expected to be below the South African inflation by $1\%$ per year,

throughout the life of this investment. The current exchange spot rate is R $1\mathrm{.}78$ to the Krone.

QUESTION $12(4$ Marks$)$

The annuity factor for setting up the new division at home is:

A$.4\mathrm{.}29$

B$.4\mathrm{.}87$

C$.4\mathrm{.}98$

D$.4\mathrm{.}52$

QUESTION $13(4$ Marks$)$

The annual cash flow for setting up the new division at home is:

A$.$ R $1000000$

B$.$ R $1500000$

C$.$ R $2000000$

D$.$ R $2500000$

QUESTION $14(4$ Marks$)$

The estimated amount of money made over the $7-$year period for setting up the new division at home is:

A$.$ R $7930000$

B$.$ R $6705000$

C$.$ R $8762000$

D$.$ R $7305000$

QUESTION $15(4$ Marks$)$

The NPV for setting up the new division at home is:

A$.$ R $6965$