2017年12月ACCA考试P4高级财务管理真题及答案解析.doc

1、2017年 12月 ACCA考试 P4高级财务管理真题及答案解析(总分：125.00，做题时间：195 分钟)案例分析题(总题数：4，分数：125.00)Section A This ONE question is compulsory and MUST be attemptedConejo Co is a listed company based in Ardilla and uses the $ as its currency. The company was formed around 20 years ago and was initially involved in cybernet

2、ics, robotics and artificial intelligence within the information technology industry. At that time due to the risky ventures Conejo Co undertook, its cash flows and profits were very varied and unstable. Around 10 years ago, it started an information systems consultancy business and a business devel

3、oping cyber security systems. Both these businesses have been successful and have been growing consistently. This in turn has resulted in a stable growth in revenues, profits and cash flows. The company continues its research and product development in artificial intelligence and robotics, but this

4、business unit has shrunk proportionally to the other two units.Just under eight years ago, Conejo Co was successfully listed on Ardillas national stock exchange, offering 60% of its share capital to external equity holders, whilst the original founding members retained the remaining 40% of the equit

5、y capital. The company remains financed largely by equity capital and reserves, with only a small amount of debt capital. Due to this, and its steadily growing sales revenue, profits and cash flows, it has attracted a credit rating of A from the credit rating agencies.At a recent board of directors

6、(BoD) meeting, the companys chief financial officer (CFO) argued that it was time for Conejo Co to change its capital structure by undertaking a financial reconstruction, and be financed by higher levels of debt. As part of her explanation, the CFO said that Conejo Co is now better able to bear the

7、increased risk resulting from higher levels of debt finance; would be better protected from predatory acquisition bids if it was financed by higher levels of debt; and could take advantage of the tax benefits offered by increased debt finance. She also suggested that the expected credit migration fr

8、om a credit rating of A to a credit rating of BBB, if the financial reconstruction detailed below took place, would not weaken Conejo Co financially.Financial reconstructionThe BoD decided to consider the financial reconstruction plan further before making a final decision. The financial reconstruct

9、ion plan would involve raising $1,320 million ($132 billion) new debt finance consisting of bonds issued at their face value of $100. The bonds would be redeemed in five years time at their face value of $100 each. The funds raised from the issue of the new bonds would be used to implement one of th

10、e following two proposals:(i) Proposal 1: Either buy back equity shares at their current share price, which would be cancelled after they have been repurchased; or(ii) Proposal 2: Invest in additional assets in new business ventures.Conejo Co, Financial informationExtract from the forecast financial

11、 position for next yearConejo Cos forecast after-tax profit for next year is $350 million and its current share price is $11 per share.The non-current liabilities consist solely of 52% coupon bonds with a face value of $100 each, which are redeemable at their face value in three years time. These bo

12、nds are currently trading at $10780 per $100. The bonds covenant stipulates that should Conejo Cos borrowing increase, the coupon payable on these bonds will increase by 37 basis points.Conejo Co pays tax at a rate of 15% per year and its after-tax return on the new investment is estimated at 12%.Ot

13、her financial informationCurrent government bond yield curveThe finance director wants to determine the percentage change in the value of Conejo Cos current bonds, if the credit rating changes from A to BBB. Furthermore, she wants to determine the coupon rate at which the new bonds would need to be

14、issued, based on the current yield curve and appropriate yield spreads given above.Conejo Cos chief executive officer (CEO) suggested that if Conejo Co paid back the capital and interest of the new bond in fixed annual repayments of capital and interest through the five-year life of the bond, then t

15、he risk associated with the extra debt finance would be largely mitigated. In this case, it was possible that credit migration, by credit rating companies, from A rating to BBB rating may not happen. He suggested that comparing the duration of the new bond based on the interest payable annually and

16、the face value in five years time with the duration of the new bond where the borrowing is paid in fixed annual repayments of interest and capital could be used to demonstrate this risk mitigation.Required:（分数：50）(1).Discuss the possible reasons for the finance directors suggestions that Conejo Co c

17、ould benefit from higher levels of debt with respect to risk, from protection against acquisition bids, and from tax benefits. （分数：7）_(2).Prepare a report for the board of directors of Conejo Co which:(i) Estimates, and briefly comments on, the change in value of the current bond and the coupon rate

18、 required for the new bond, as requested by the CFO; (6 marks)(ii) Estimates the Macaulay duration of the new bond based on the interest payable annually and face value repayment, and the Macaulay duration based on the fixed annual repayment of the interest and capital, as suggested by the CEO; (6 m

19、arks)(iii) Estimates the impact of the two proposals on how the funds may be used on next years forecast earnings, forecast financial position, forecast earnings per share and on forecast gearing; (11 marks)(iv) Using the estimates from (b)(i), (b)(ii) and (b)(iii), discusses the impact of the propo

20、sed financial reconstruction and the proposals on the use of funds on: Conejo Co; Possible reaction(s) of credit rating companies and on the expected credit migration, including the suggestion made by the CEO; Conejo Cos equity holders; Conejo Cos current and new debt holders.(16 marks)Professional

21、marks will be awarded in part (b) for the format, structure and presentation of the report. (4 marks)（分数：43）_Section B TWO questions ONLY to be attemptedEview Cinemas Co is a long-established chain of cinemas in the country of Taria. Twenty years ago Eview Cinemas Cos board decided to convert some o

22、f its cinemas into sports gyms, known as the EV clubs. The number of EV clubs has expanded since then. Eview Cinemas Cos board brought in outside managers to run the EV clubs, but over the years there have been disagreements between the clubs managers and the board. The managers have felt that the b

23、oard has wrongly prioritised investment in, and refurbishment of, the cinemas at the expense of the EV clubs.Five years ago, Eview Cinemas Co undertook a major refurbishment of its cinemas, financing this work with various types of debt, including loan notes at a high coupon rate of 10%. Shortly aft

24、er the work was undertaken, Taria entered into a recession which adversely affected profitability. The finance cost burden was high and Eview Cinemas Co was not able to pay a dividend for two years.The recession is now over and Eview Cinemas Co has emerged in a good financial position, as two of its

25、 competitors went into insolvency during the recession. Eview Cinemas Cos board wishes to expand its chain of cinemas and open new, multiscreen cinemas in locations which are available because businesses were closed down during the recession.In two years time Taria is due to host a major sports fest

26、ival. This has encouraged interest in sport and exercise in the country. As a result, some gym chains are looking to expand and have contacted Eview Cinemas Cos board to ask if it would be interested in selling the EV clubs. Most of the directors regard the cinemas as the main business and so are re

27、ceptive to selling the EV clubs.The finance director has recommended that the sales price of the EV clubs be based on predicted free cash flows as follows:1. The predicted free cash flow figures in $millions for EV clubs are as follows:2. After Year 4, free cash flows should be assumed to increase a

28、t 52% per annum.3. The discount rate to be used should be the current weighted average cost of capital, which is 12%.4. The finance director believes that the result of the free cash flow valuation will represent a fair value of the EV clubs business, but Eview Cinemas Co is looking to obtain a 25%

29、premium on the fair value as the expected sales price.Other information supplied by the finance director is as follows:1. The predicted after-tax profits of the EV clubs are $454 million in Year 1. This can be assumed to be 40% of total after-tax profits of EV Cinemas Co.2. The expected proceeds whi

30、ch Eview Cinemas Co receives from selling the EV clubs will be used firstly to pay off the 10% loan notes. Part of the remaining amount from the sales proceeds will then be used to enhance liquidity by being held as part of current assets, so that the current ratio increases to 15. The rest of the r

31、emaining amount will be invested in property, plant and equipment. The current net book value of the non-current assets of the EV clubs to be sold can be assumed to be $3,790 million. The profit on the sale of the EV clubs should be taken directly to reserves.3. Eview Cinemas Cos asset beta for the

32、cinemas can be assumed to be 0952.4. Eview Cinemas Co currently has 1,000 million $1 shares in issue. These are currently trading at $1575 per share. The finance director expects the share price to rise by 10% once the sale has been completed, as he thinks that the stock market will perceive it to b

33、e a good deal.5. Tradeable debt is currently quoted at $96 per $100 for the 10% loan notes and $93 per $100 for the other loan notes. The value of the other loan notes is not expected to change once the sale has been completed. The overall pre-tax cost of debt is currently 9% and can be assumed to f

34、all to 8% when the 10% loan notes are redeemed.6. The current tax rate on profits is 20%.7. Additional investment in current assets is expected to earn a 7% pre-tax return and additional investment in property, plant and equipment is expected to earn a 12% pre-tax return.8. The current risk-free rat

35、e is 4% and the return on the market portfolio is 10%.Eview Cinemas Cos current summarised statement of financial position is shown below. The CEO wants to know the impact the sale of the EV clubs would have immediately on the statement of financial position, the impact on the Year 1 forecast earnin

36、gs per share and on the weighted average cost of capital.Required:（分数：25）(1).Calculate the expected sales price of the EV clubs and demonstrate its impact on Eview Cinemas Cos statement of financial position, forecast earnings per share and weighted average cost of capital.（分数：17）_(2).Evaluate the d

37、ecision to sell the EV clubs.（分数：8）_High K Co is one of the three largest supermarket chains in the country of Townia. Its two principal competitors, Dely Co and Leminster Co, are of similar size to High K Co. In common with its competitors (but see below), High K Co operates three main types of sto

38、re: Town centre stores these sell food and drink and a range of small household items. High K Cos initial growth was based on its town centre stores, but it has been shutting them over the last decade, although the rate of closure has slowed in the last couple of years. Convenience stores these are

39、smaller and sell food and drink and very few other items. Between 2003 and 2013, High K Co greatly expanded the number of convenience stores it operated. Their performance has varied, however, and since 2013, High K Co has not opened any new stores and closed a number of the worst-performing stores.

40、 Out-of-town stores these sell food and drink and a full range of household items, including large electrical goods and furniture. The number of out-of-town stores which High K Co operated increased significantly until 2010, but has only increased slightly since.The majority of town centre and out-o

41、f-town stores premises are owned by High K Co, but 85% of convenience stores premises are currently leased.High K Co also sells most of its range of products online, either offering customers home delivery or click and collect (where the customer orders the goods online and picks them up from a coll

42、ection point in one of the stores).High K Cos year end is 31 December. When its 2016 results were published in April 2017, High K Cos chief executive emphasised that the group was focusing on: Increasing total shareholder return by improvements in operating efficiency and enhancement of responsivene

43、ss to customer needs Ensuring competitive position by maintaining flexibility to respond to new strategic challenges Maintaining financial strength by using diverse sources of funding, including making use in future of revolving credit facilitiesSince April 2017, Dely Co and Leminster Co have both a

44、nnounced that they will be making significant investments to boost online sales. Dely Co intends to fund its investments by closing all its town centre and convenience stores, although it also intends to open more out-of-town stores in popular locations.The government of Townia was re-elected in May

45、 2017. In the 18 months prior to the election, it eased fiscal policy and consumer spending significantly increased. However, it has tightened fiscal policy since the election to avoid the economy overheating. It has also announced an investigation into whether the countrys large retail chains treat

46、 their suppliers unfairly.Extracts from High K Cos 2016 financial statements and other information about it are given below:High K Co statement of profit or loss extractsYear ending 31 December (all amounts in $m)High K Co statement of financial position extractsYear ending 31 December (all amounts

47、in $m)Required:（分数：25）(1).Evaluate High K Cos financial performance. You should indicate in your discussion areas where further information about High K Co would be helpful. Provide relevant calculations for ratios and trends to support your evaluation.Note: Up to 10 marks are available for calculat

48、ions.（分数：21）_(2).Discuss how High K Co may seek to finance an investment programme.（分数：4）_Wardegul Co, a company based in the Eurozone, has expanded very rapidly over recent years by a combination of acquiring subsidiaries in foreign countries and setting up its own operations abroad. Wardegul Cos board h