Question 1

A capital investment project shows a NPV of 3,450 at a discounted rate of 8% and an NPV of 1,210 at a discounted rate of 9%.
Whatistheinternal rate ofreturn?

Options :

A : 11.85%

B : 10.85%

C : 10.54%

D : 9.54%

Answer: D

Question 2

M plc is an IT company thatbids for large contracts to sell computer systems and also to serviceexisting systems. M plc's senior management hasalwayssetbudgets which are hard to achieve andhavemade no allowances for the recession.
The economy has improved andM plc's senior managershave made the budget even more optimistic. The budgetedsalestargethas been increased by 40%.
In the past,sales staffhave not tried to achievethe budgetsales because itwas generallybelieved that the targets wereimpossible to reach.
M plc has recently appointed a new Sales Directorwhohas decided that sales staff will bedismissedif they fail to meet sales targets for three successive months. He is also looking forhighersalesmargins than wereachievedbefore.
What are the likely consequences ofthe new Sales Director'spolicy?

Options :

A : Sales staff will be happier in their jobs.

B : Sales staff will tender for riskier contracts.

C : Sales staff will encroach on other sales staff territories to get more work.

D : Sales staff will look for new jobs.

E : Sales staff will feel more settled and secure in their jobs.

Answer: B,C,D

Question 3

SDF is a quoted company. Which of the following matters should normally be dealt with by SDF's audit committee?

Options :

A : The external auditor has requested a higher fee than normal for the forthcoming financial year because new legislation will require additional audit work.

B : The Head of Internal Audit is concerned that a recent internal audit investigation may have revealed serious compliance failures.

C : The external auditor is concerned that an accounting policy selected by the Finance Director does not comply with the spirit of the relevant accounting standard.

D : The external auditor has identified a material error, due to a clear miscalculation, in the draft financial statements.

E : The Finance Director will be retiring within the next year and a replacement will have to be found.

Answer: A,B,C

Question 4

JHG manufactures inexpensive cars that compete largely on price Its cars have very basic equipment and small but economical engines JHG's Board is considering launching a luxury brand of cars that will be far better equipped, more comfortable and have much better performance
Which THREE of the following would be relevant factors to incorporate into the stress testing of this new strategy to create a luxury brand?

Options :

A : Reductions m motorway speed limits

B : The need for consumer research

C : Increased tax on vehicle emissions

D : The cost of designing new cars.

E : Potential changes in interest rates.

F : Sales of JHG-s existing range of cars

Answer: A,C,D

Question 5

GHY is a listed company. Tom isGHY'sCEO and Peter isitsnon-executive Chair of the Board. Tom and Peterbothhave substantial relevant business and industrial experience andboth are believed to have considerable integrity. Tom and Peter quickly developed a good working relationship after Peter's appointment. They have become close friends.
Tom briefs Peter on every aspect of the business. Tom and Peter jointlyagreethe agenda foreveryboard meetingandboth agree on the manner in which matterswill be presented to theboard.
Taking account of the principles of goodcorporategovernance, which of the following statements is correct?

Options :

A : It is entirely appropriate that Tom and Peter have this kind of relationship and both are acting in the best interests of the company

B : Non-contentious board meetings show how well Tom and Peter are running the company and shows that the management is cohesive.

C : The relationship between Peter and Tom may have a detrimental effect on company decision making as the Boardis not always being informed about matters in an unbiased manner.

D : Since the non-executive chair clearly has a significant role within this company there is little danger that any individual will become excessively dominant.

Answer: C