Financial Pillar
24 November 2011 – Thursday Afternoon Session Instructions to candidates You are allowed three hours to answer this question paper. You are allowed 20 minutes reading time before the examination begins during which you should read the question paper and, if you wish, highlight and/or make notes on the question paper. However, you will not be allowed, under any circumstances, to open the answer book and start writing or use your calculator during this reading time. You are strongly advised to carefully read ALL the question requirements before attempting the question concerned (that is all parts and/or subquestions). ALL answers must be written in the answer book. Answers written on the question paper will not be submitted for marking. You should show all workings as marks are available for the method you use. ALL QUESTIONS ARE COMPULSORY. Section A comprises 5 questions and is on pages 2 to 6. Section B comprises 2 questions and is on pages 8 to 11. Maths tables and formulae are provided on pages 13 to 15. The list of verbs as published in the syllabus is given for reference on page 19. Write your candidate number, the paper number and examination subject title in the spaces provided on the front of the answer book. Also write your contact ID and name in the space provided in the right hand margin and seal to close. Tick the appropriate boxes on the front of the answer book to indicate the questions you have answered.
The Chartered Institute of Management Accountants 2011
F2 – Financial Management
F2 – Financial Management
SECTION A – 50 MARKS [You are advised to spend no longer than 18 minutes on each question in this section.]
ANSWER ALL FIVE QUESTIONS IN THIS SECTION
Question One BG acquired 25% of the equity share capital of JV several years ago when the retained earnings of JV were $40,000. JV operates as a separate entity under a contractual agreement between BG and 3 other parties, each party holding an equal proportion of the equity share capital. The investment in JV is held at cost in BG’s individual financial statements, and has been correctly classified as a joint venture. Statement of financial position as at 31 March 2011
BG $000
JV $000
322 70 392
280 280
111 115 35 21 282
120 132 40 292
674
572
120 18 213 351
200 120 320
90
-
Total liabilities
185 48 233 323
160 92 252 252
Total equity and liabilities
674
572
ASSETS Non-current assets Property, plant and equipment Investment in JV Current assets Inventories Receivables Held for trading investment Cash and cash equivalents
Total assets EQUITY AND LIABILITIES Equity attributable to owners of the parent Share capital ($1 shares) Revaluation reserve Retained earnings Total equity Non-current liabilities Long term borrowings Current liabilities Payables Income tax payable
Additional information: 1.
During the year JV sold goods to BG for $200,000. Half of these goods remain in BG’s inventories at 31 March 2011. JV makes a 20% margin on all sales. The most recent invoice for $24,000 sent from JV to BG in respect of these sales remains outstanding at the year end.
2.
BG holds another investment, which it has correctly classified as held for trading. The fair value of this investment at 31 March 2011 was $42,000, although this has not yet been reflected in the financial statements.
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Required: (a) Prepare the consolidated statement of financial position for the BG group as at 31 March 2011, assuming BG group adopts proportionate consolidation in accounting for joint ventures. (7 marks)
(b) Explain the alternative accounting treatment permitted by IAS 31 Interests in Joint Ventures in accounting for joint venture entities AND how adopting this policy would change the BG group’s statement of financial position (no further calculations are required). (3 marks) (Total for Question One = 10 marks)
Question Two DRT has entered into the following agreements in the year to 31 May 2011: Sale of land On 31 May 2011 DRT sold land to NKL, an entity that provides DRT with long-term finance. The sale price was $1,600,000 and the carrying value of the land on the date of the sale was $1,310,000 (the original cost of the asset). Under the terms of the sale agreement DRT has the option to repurchase the land within the next four years for between $1,660,000 and $1,800,000 depending on the date of repurchase. NKL cannot use the land for any purpose without the prior consent of DRT. The land must be repurchased for $1,800,000 at the end of the four year period if the option is not exercised before that time. DRT has derecognised the land and recorded the subsequent gain within profit for the year ended 31 May 2011.
Required: (a) Discuss how the sale of the land should be accounted for in accordance with the principles of IAS 18 Revenue and the Framework for Preparation and Presentation of Financial Statements AND prepare any accounting adjustments required to DRT’s financial statements for the year to 31 May 2011. (5 marks)
TURN OVER
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Set-up of payroll services entity, GHJ Until 1 January 2011, DRT operated a payroll services division providing payroll services for itself and also for a number of external customers. On 1 January 2011 the business of the division and assets with a value of $300,000 were transferred into a separate entity called GHJ, which was set up by DRT. The sales director of GHJ owns 100% of its equity share capital. A contractual agreement signed by both the sales director of GHJ and a director of DRT, states that the operating and financial policies of GHJ will be made by the board of DRT. GHJ has acquired a long-term loan of $1 million with DRT acting as guarantor. Profits and losses of GHJ, after deduction of the sales director’s salary, flow to DRT. The directors of DRT wish to avoid consolidating GHJ as the additional borrowings of GHJ would negatively impact DRT’s gearing ratio.
Required: (b) Discuss how the relationship with GHJ should be reflected in the financial statements of the DRT group. Your answer should make reference to any relevant international accounting standards. (5 marks) (Total for Question Two = 10 marks)
Question Three On 1 July 2010 BNM, a listed entity, had 5,000,000 $1 ordinary shares in issue. On 1 September 2010, BNM made a 1 for 2 bonus issue from retained earnings. On 1 February 2011 BNM issued 3,000,000 $1 ordinary shares for $4.10 each, which was their full market price. BNM generated profit after tax of $3.8m for the year ended 30 June 2011. The basic earnings per share for the year ended 30 June 2010 was 48.2 cents. At 1 July 2010 the ordinary shareholders of BNM held options to purchase 1,000,000 $1 ordinary shares at $3.10 per share. The options are exercisable between 1 July 2012 and 30 June 2014. No further options were issued in the year. The average market value of one $1 ordinary share of BNM during the year ended 30 June 2011 was $4.00.
Required: (a) Calculate the basic earnings per share to be reported in the financial statements of BNM for the year ended 30 June 2011, including the comparative figure, in accordance with the requirements of IAS 33 Earnings Per Share. (5 marks)
(b) Calculate the diluted earnings per share for the year ended 30 June 2011, in accordance with the requirements of IAS 33 Earnings Per Share. (A comparative figure is NOT required). (3 marks)
(c) Explain why it is important for users to have diluted earnings per share presented in the financial statements. (2 marks) (Total for Question Three = 10 marks)
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Question Four Financial Instrument QWS issued a redeemable debt instrument on 1 July 2009 at its par value of $6 million. The instrument carries a fixed coupon interest rate of 6%, which is payable annually in arrears. The debt instrument will be redeemed for $6.02 million on 30 June 2013. Transaction costs associated with the issue were $200,000 and were paid at the time of issue. The effective interest rate applicable to this liability is approximately 7.06%.
Required: (i)
Explain how this instrument will be initially and subsequently measured.
(ii)
Calculate the carrying value of the liability to be included in QWS’s statement of financial position as at 30 June 2011. (Round all workings to the nearest $000) (5 marks)
Pension plan QWS operates a defined benefit pension plan for its employees. At 1 July 2010 the fair value of the pension plan assets was $1,200,000 and the present value of the plan liabilities was $1,400,000. The interest cost on the plan liabilities was estimated at 7% and the expected return on plan assets at 4%. The actuary estimates that the current service cost for the year ended 30 June 2011 is $300,000. QWS made contributions into the pension plan of $400,000 in the year. The pension plan paid $220,000 to retired members in the year to 30 June 2011. At 30 June 2011 the fair value of the pension plan assets was $1,400,000 and the present value of the plan liabilities was $1,600,000. In accordance with the amendment to IAS 19 Employee Benefits, QWS recognises actuarial gains and losses in other comprehensive income in the period in which they occur.
Required: Calculate the net expense that will be included in QWS’s profit or loss AND the amounts that would be included in other comprehensive income in respect of actuarial gains or losses for the year ended 30 June 2011. (Round all workings to the nearest $000) (5 marks) (Total for Question Four = 10 marks)
TURN OVER
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Question Five The Financial Accounting Standards Board, the main standard-setting body in the USA, and the International Accounting Standards Board agreed, at their Norwalk meeting in 2002, to work towards making their existing and future financial reporting standards fully compatible.
Required: (a)
Discuss the progress made towards convergence, including how this has been achieved. (6 marks)
(b)
Discuss the benefits of convergence to BOTH investors and accounting students. (4 marks) (Total for Question Five = 10 marks)
(Total for Section A = 50 marks)
End of Section A Section B starts on page 8
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SECTION B – 50 MARKS [You are advised to spend no longer than 45 minutes on each question in this section.]
ANSWER BOTH QUESTIONS IN THIS SECTION – 25 MARKS EACH
Question Six The statements of comprehensive income for three entities for the year ended 31 March 2011 are presented below:
Revenue Cost of sales Gross profit Administrative expenses Distribution costs Investment income Finance costs Profit before tax Income tax expense Profit for the year Other comprehensive income Revaluation of property, plant and equipment Gains on investments in NJ and MK Tax effect of OCI Other comprehensive income for the year, net of tax Total comprehensive income for the year
BH $000 3,360 (1,800) 1,560 (380) (400) 80 (180) 680 (200) 480
NJ $000 3,240 (1,860) 1,380 (340) (300) (140) 600 (160) 440
MK $000 2,390 (1,380) 1,010 (250) (150) (110) 500 (150) 350
70 96 (50)
40 (16)
30 (10)
116 596
24 464
20 370
Additional information: 1.
BH acquired a 25% investment in NJ on 1 September 2002 for $300,000. The investment was classified as available for sale and the gains earned on it have been recorded within other comprehensive income in BH’s individual financial statements. The fair value of the 25% investment at 31 March 2010 was $400,000 and at 1 January 2011 was $425,000. BH was not able to exercise significant influence over the financial and operating policies of NJ. On 1 January 2011, BH acquired an additional 40% of the 1 million $1 equity shares of NJ for $680,000. The retained reserves of NJ at that date were $526,000. The group policy is to value the non-controlling interest at its fair value at the date of acquisition. The non-controlling interest had a fair value of $581,000 at 1 January 2011. NJ lost a key customer in February and BH’s directors have decided that goodwill on acquisition is impaired by 10% at 31 March 2011. Impairment losses are charged to group administrative expenses. The investment in NJ continues to be held as an available for sale asset in BH’s individual financial statements and recorded at its fair value of $1,170,000 at 31 March 2011. The total gains recorded to date in respect of NJ are $190,000, of which $90,000 occurred in the year and are included in the other comprehensive income of BH.
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2.
BH acquired 40% of the equity share capital of MK for $334,000 on 1 October 2010. The investment was classified as available for sale and the gains earned on it since its acquisition have been recorded within other comprehensive income in the year in BH’s individual financial statements. The fair value of this available for sale asset at 31 March 2011 was $340,000. BH exercises significant influence over the financial and operating policies of MK. A new competitor has recently entered the market in which MK operates and it is likely that this will have an immediate impact on MK’s profits in the coming period. As a result, the directors of BH have decided that the investment in MK should be subject to 10% impairment at 31 March 2011.
3.
NJ sold goods to BH in January 2011 for $200,000. Half of these items remain in BH’s inventories at the year end. NJ earns a 20% gross margin on all sales.
4.
The profits of all three entities can be assumed to accrue evenly throughout the year. Assume there is no further impact to income tax figures.
5.
MK paid a dividend of $80,000 to its equity shareholders on 31 March 2011. BH included its share of the dividend in investment income.
Required: Prepare the consolidated statement of comprehensive income for the BH Group for the year ended 31 March 2011. (Round all figures to the nearest $000.) (18 marks)
The directors of BH, with the backing of the non-controlling shareholders of NJ, are considering moving NJ to a new facility overseas. NJ would then source all raw materials locally, recruit a local workforce and would be subject to local taxes and corporate regulations. The facility identified is in a country that uses the KRON as its currency, whilst BH and the rest of the group use the $. Since acquisition, NJ has operated relatively autonomously within the group and this is expected to continue if the move takes place. The directors are unsure about the currency that would be used to prepare the financial statements of NJ if the relocation was to go ahead and what implication this might have for the group financial statements.
Required: Apply the principles of IAS 21 The Effects of Changes in Foreign Exchange Rates, to establish which currency should be used to prepare the financial statements of NJ, assuming that NJ moves to the overseas facility identified above. (7 marks) (Total for Question Six = 25 marks)
Section B continues on the next page TURN OVER
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Question Seven Mr X owned a highly successful technology business which he sold five years ago for $20 million. He then set up an investment entity that invests, primarily in smaller private businesses in need of short to medium term funding. Mr X sits on the board as a nonexecutive director of a number of the entities that his business has invested in and is often able to offer valuable business advice to these entities, especially in the area of research and development activities. Mr X has been approached by the managing director of ABC, a small private entity looking for investment. ABC has been trading for more than 10 years manufacturing and selling its own branded perfumes, lotions and candles to the public in its 15 retail stores and to other larger retailing entities. Revenues and profits have been steady over the last 10 years. However 18 months ago, the newly appointed sales director saw an opportunity to sell the products online. Using long term funding, he therefore set up an online shop. The online shop has been operating successfully for the last 14 months. The sales director also used his prior contacts to secure a lucrative deal with a boutique hotel chain for ABC to manufacture products for the hotel, carrying the hotel chain name and logo. The managing director of ABC now believes that the business has further opportunities and does not wish to lose the momentum created by the sales director. The bank that currently provides both a long-term loan and an overdraft facility has rejected ABC’s request for additional funds on the basis that there are insufficient assets to offer for security (the existing funding is secured on ABC’s property, plant and equipment). Extracts from the financial statements for ABC are provided below: Statement of comprehensive income for the year ended 30 June Revenue Cost of sales Gross profit Administrative expenses Distribution costs Finance costs Profit before tax Income tax expense Profit for the year
2011
2010
$’000 6,000 (4,083) 1,917 (870) (464) (43) 540 (135) 405
$’000 3,700 (2,590) 1,110 (413) (356) (34) 307 (80) 227
The revenues and profits of the three business segments for the year ended 30 June 2011 were: Retail operations
Hotel contract $’000 $’000 $’000 Revenues 4,004 1,096 900 Gross profit 1,200 330 387 Profit before tax 320 138 82 The online store earned a negligible amount of revenue and profit in the year ended 30 June 2010.
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Financial Management
Statement of financial position as at 30 June
2011 $’000
2010 $’000
380 20 400
400 10 410
1,260 455 1,715
1,180 310 42 1,532
2,115
1,942
550 722 1,272
550 610 1,160
412
404
363 68 431 843
378 378 782
2,115
1,942
ASSETS Non-current assets Property, plant and equipment Intangible assets – development costs Current assets Inventories Receivables Cash and cash equivalents
Total assets EQUITY AND LIABILITIES Equity Share capital ($1 equity shares) Retained earnings Total equity Non-current liabilities Long-term borrowings Current liabilities Payables Short-term borrowings (overdraft) Total liabilities Total equity and liabilities
As a member of Mr X’s investment management team, you have been asked to analyse the financial performance and position of ABC and make a recommendation as to whether this request for investment should be considered further by Mr X.
Required: (a)
Prepare a report that analyses the financial performance of ABC for the year ended 30 June 2011 and its financial position at that date, and makes a recommendation as to whether the investment should be considered further. (8 marks are available for the calculation of relevant ratios) (20 marks)
(b)
Discuss the benefits and limitations to Mr X of relying on traditional ratio analysis when deciding whether or not to invest in ABC. (5 marks) (Total for Question Seven = 25 marks)
(Total for Section B = 50 marks)
End of Question Paper Maths Tables and Formulae are on pages 13 to 15 TURN OVER
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MATHS TABLES AND FORMULAE Present value table -n
Present value of $1, that is (1 + r) where r = interest rate; n = number of periods until payment or receipt. Periods (n) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
1% 0.990 0.980 0.971 0.961 0.951 0.942 0.933 0.923 0.914 0.905 0.896 0.887 0.879 0.870 0.861 0.853 0.844 0.836 0.828 0.820
2% 0.980 0.961 0.942 0.924 0.906 0.888 0.871 0.853 0.837 0.820 0.804 0.788 0.773 0.758 0.743 0.728 0.714 0.700 0.686 0.673
3% 0.971 0.943 0.915 0.888 0.863 0.837 0.813 0.789 0.766 0.744 0.722 0.701 0.681 0.661 0.642 0.623 0.605 0.587 0.570 0.554
4% 0.962 0.925 0.889 0.855 0.822 0.790 0.760 0.731 0.703 0.676 0.650 0.625 0.601 0.577 0.555 0.534 0.513 0.494 0.475 0.456
Interest rates (r) 5% 6% 0.952 0.943 0.907 0.890 0.864 0.840 0.823 0.792 0.784 0.747 0.746 0.705 0.711 0.665 0.677 0.627 0.645 0.592 0.614 0.558 0.585 0.527 0.557 0.497 0.530 0.469 0.505 0.442 0.481 0.417 0.458 0.394 0.436 0.371 0.416 0.350 0.396 0.331 0.377 0.312
7% 0.935 0.873 0.816 0.763 0.713 0.666 0.623 0.582 0.544 0.508 0.475 0.444 0.415 0.388 0.362 0.339 0.317 0.296 0.277 0.258
8% 0.926 0.857 0.794 0.735 0.681 0.630 0.583 0.540 0.500 0.463 0.429 0.397 0.368 0.340 0.315 0.292 0.270 0.250 0.232 0.215
9% 0.917 0.842 0.772 0.708 0.650 0.596 0.547 0.502 0.460 0.422 0.388 0.356 0.326 0.299 0.275 0.252 0.231 0.212 0.194 0.178
10% 0.909 0.826 0.751 0.683 0.621 0.564 0.513 0.467 0.424 0.386 0.350 0.319 0.290 0.263 0.239 0.218 0.198 0.180 0.164 0.149
Periods (n) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
11% 0.901 0.812 0.731 0.659 0.593 0.535 0.482 0.434 0.391 0.352 0.317 0.286 0.258 0.232 0.209 0.188 0.170 0.153 0.138 0.124
12% 0.893 0.797 0.712 0.636 0.567 0.507 0.452 0.404 0.361 0.322 0.287 0.257 0.229 0.205 0.183 0.163 0.146 0.130 0.116 0.104
13% 0.885 0.783 0.693 0.613 0.543 0.480 0.425 0.376 0.333 0.295 0.261 0.231 0.204 0.181 0.160 0.141 0.125 0.111 0.098 0.087
14% 0.877 0.769 0.675 0.592 0.519 0.456 0.400 0.351 0.308 0.270 0.237 0.208 0.182 0.160 0.140 0.123 0.108 0.095 0.083 0.073
Interest rates (r) 15% 16% 0.870 0.862 0.756 0.743 0.658 0.641 0.572 0.552 0.497 0.476 0.432 0.410 0.376 0.354 0.327 0.305 0.284 0.263 0.247 0.227 0.215 0.195 0.187 0.168 0.163 0.145 0.141 0.125 0.123 0.108 0.107 0.093 0.093 0.080 0.081 0.069 0.070 0.060 0.061 0.051
17% 0.855 0.731 0.624 0.534 0.456 0.390 0.333 0.285 0.243 0.208 0.178 0.152 0.130 0.111 0.095 0.081 0.069 0.059 0.051 0.043
18% 0.847 0.718 0.609 0.516 0.437 0.370 0.314 0.266 0.225 0.191 0.162 0.137 0.116 0.099 0.084 0.071 0.060 0.051 0.043 0.037
19% 0.840 0.706 0.593 0.499 0.419 0.352 0.296 0.249 0.209 0.176 0.148 0.124 0.104 0.088 0.079 0.062 0.052 0.044 0.037 0.031
20% 0.833 0.694 0.579 0.482 0.402 0.335 0.279 0.233 0.194 0.162 0.135 0.112 0.093 0.078 0.065 0.054 0.045 0.038 0.031 0.026
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Cumulative present value of $1 per annum, Receivable or Payable at the end of each year for n years Periods (n) 1 2 3 4 5
1− (1+ r ) − n r
1% 0.990 1.970 2.941 3.902 4.853
2% 0.980 1.942 2.884 3.808 4.713
3% 0.971 1.913 2.829 3.717 4.580
4% 0.962 1.886 2.775 3.630 4.452
Interest rates (r) 5% 6% 0.952 0.943 1.859 1.833 2.723 2.673 3.546 3.465 4.329 4.212
7% 0.935 1.808 2.624 3.387 4.100
8% 0.926 1.783 2.577 3.312 3.993
9% 0.917 1.759 2.531 3.240 3.890
10% 0.909 1.736 2.487 3.170 3.791
6 7 8 9 10
5.795 6.728 7.652 8.566 9.471
5.601 6.472 7.325 8.162 8.983
5.417 6.230 7.020 7.786 8.530
5.242 6.002 6.733 7.435 8.111
5.076 5.786 6.463 7.108 7.722
4.917 5.582 6.210 6.802 7.360
4.767 5.389 5.971 6.515 7.024
4.623 5.206 5.747 6.247 6.710
4.486 5.033 5.535 5.995 6.418
4.355 4.868 5.335 5.759 6.145
11 12 13 14 15
10.368 11.255 12.134 13.004 13.865
9.787 10.575 11.348 12.106 12.849
9.253 9.954 10.635 11.296 11.938
8.760 9.385 9.986 10.563 11.118
8.306 8.863 9.394 9.899 10.380
7.887 8.384 8.853 9.295 9.712
7.499 7.943 8.358 8.745 9.108
7.139 7.536 7.904 8.244 8.559
6.805 7.161 7.487 7.786 8.061
6.495 6.814 7.103 7.367 7.606
16 17 18 19 20
14.718 15.562 16.398 17.226 18.046
13.578 14.292 14.992 15.679 16.351
12.561 13.166 13.754 14.324 14.878
11.652 12.166 12.659 13.134 13.590
10.838 11.274 11.690 12.085 12.462
10.106 10.477 10.828 11.158 11.470
9.447 9.763 10.059 10.336 10.594
8.851 9.122 9.372 9.604 9.818
8.313 8.544 8.756 8.950 9.129
7.824 8.022 8.201 8.365 8.514
11% 0.901 1.713 2.444 3.102 3.696
12% 0.893 1.690 2.402 3.037 3.605
13% 0.885 1.668 2.361 2.974 3.517
14% 0.877 1.647 2.322 2.914 3.433
Interest rates (r) 15% 16% 0.870 0.862 1.626 1.605 2.283 2.246 2.855 2.798 3.352 3.274
17% 0.855 1.585 2.210 2.743 3.199
18% 0.847 1.566 2.174 2.690 3.127
19% 0.840 1.547 2.140 2.639 3.058
20% 0.833 1.528 2.106 2.589 2.991
6 7 8 9 10
4.231 4.712 5.146 5.537 5.889
4.111 4.564 4.968 5.328 5.650
3.998 4.423 4.799 5.132 5.426
3.889 4.288 4.639 4.946 5.216
3.784 4.160 4.487 4.772 5.019
3.685 4.039 4.344 4.607 4.833
3.589 3.922 4.207 4.451 4.659
3.498 3.812 4.078 4.303 4.494
3.410 3.706 3.954 4.163 4.339
3.326 3.605 3.837 4.031 4.192
11 12 13 14 15
6.207 6.492 6.750 6.982 7.191
5.938 6.194 6.424 6.628 6.811
5.687 5.918 6.122 6.302 6.462
5.453 5.660 5.842 6.002 6.142
5.234 5.421 5.583 5.724 5.847
5.029 5.197 5.342 5.468 5.575
4.836 4.988 5.118 5.229 5.324
4.656 7.793 4.910 5.008 5.092
4.486 4.611 4.715 4.802 4.876
4.327 4.439 4.533 4.611 4.675
16 17 18 19 20
7.379 7.549 7.702 7.839 7.963
6.974 7.120 7.250 7.366 7.469
6.604 6.729 6.840 6.938 7.025
6.265 6.373 6.467 6.550 6.623
5.954 6.047 6.128 6.198 6.259
5.668 5.749 5.818 5.877 5.929
5.405 5.475 5.534 5.584 5.628
5.162 5.222 5.273 5.316 5.353
4.938 4.990 5.033 5.070 5.101
4.730 4.775 4.812 4.843 4.870
Periods (n) 1 2 3 4 5
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FORMULAE Annuity Present value of an annuity of $1 per annum receivable or payable for n years, commencing in one year, discounted at r% per annum:
PV =
1 1 1 − r [1 + r ]n
Perpetuity Present value of $1 per annum receivable or payable in perpetuity, commencing in one year, discounted at r% per annum: PV =
1 r
Growing Perpetuity Present value of $1 per annum, receivable or payable, commencing in one year, growing in perpetuity at a constant rate of g% per annum, discounted at r% per annum: PV =
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LIST OF VERBS USED IN THE QUESTION REQUIREMENTS A list of the learning objectives and verbs that appear in the syllabus and in the question requirements for each question in this paper. It is important that you answer the question according to the definition of the verb. LEARNING OBJECTIVE Level 1 - KNOWLEDGE What you are expected to know.
Level 2 - COMPREHENSION What you are expected to understand.
VERBS USED
DEFINITION
List State Define
Make a list of Express, fully or clearly, the details/facts of Give the exact meaning of
Describe Distinguish Explain
Communicate the key features Highlight the differences between Make clear or intelligible/State the meaning or purpose of Recognise, establish or select after consideration Use an example to describe or explain something
Identify Illustrate Level 3 - APPLICATION How you are expected to apply your knowledge.
Apply Calculate Demonstrate Prepare Reconcile Solve Tabulate
Level 4 - ANALYSIS How are you expected to analyse the detail of what you have learned.
Level 5 - EVALUATION How are you expected to use your learning to evaluate, make decisions or recommendations.
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Analyse Categorise Compare and contrast
Put to practical use Ascertain or reckon mathematically Prove with certainty or to exhibit by practical means Make or get ready for use Make or prove consistent/compatible Find an answer to Arrange in a table
Construct Discuss Interpret Prioritise Produce
Examine in detail the structure of Place into a defined class or division Show the similarities and/or differences between Build up or compile Examine in detail by argument Translate into intelligible or familiar terms Place in order of priority or sequence for action Create or bring into existence
Advise Evaluate Recommend
Counsel, inform or notify Appraise or assess the value of Advise on a course of action
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Financial Pillar
Management Level Paper
F2 – Financial Management
November 2011
Thursday Afternoon Session
November 2011
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