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Section A Answer any TWO questions from this section. 1. The following information relates to Oldham Mutual Fund Management (OMF) Ltd. On 1 January 2019,

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Section A Answer any TWO questions from this section. 1. The following information relates to Oldham Mutual Fund Management (OMF) Ltd. On 1 January 2019, the company's director invested in an asset that produces the following net cash receipts (after deducting all costs) from the investment. No further net cash receipts are expected after 31 December 2021. Expected net cash receipts for 2019 E200,000 Expected net cash receipts for 2020 E460,000~ Expected net cash receipts for 2021 E800,000 Expected cost of capital for 2019 and beyond 4% On 31 December 2019, however, he had to revise downwards his expectations for future income due to a deteriorating economic environment. Actual net cash receipts for 2019 E150,000 Expected net cash receipts for 2020 E400,000 Expected net cash receipts for 2021 E670,000 / Actual cost of capital for 2019 6% & Actual cost of capital for 2020 10% Expected cost of capital for 2021 and beyond 10% Unfortunately for the company, the cost of capital has increased as the central bank attempts to fight inflation by raising interest rates. This new rate is expected to remain at that level for the foreseeable future. All cash flows arise at the end of the year. Required: (a ) Define Hicks' approach to income measurement and explain its implications for accountants. (7 marks) (b) For the asset held by the company, calculate to the nearest $1: (i) Hicks' income ex-ante for the year to 31 December 2019 (ii) Hicks' income ex post 1A and 1B for the year to 31 December 2019 (iii) Hicks' income ex post 2A and 2B for the year to 31 December 2019 (12 marks) (c) Without further calculation, briefly explain why the following differences arise: ex ante versus ex post income ex post income A versus B ex post income 1 versus 2 (6 marks)

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