A UK based company is considering an investment of GB£1,000,000 in a project in the USA. It is anticipated that the following cash flows will arise from this project.
The cash flows will be either US$400,000 with a probability of 40% or US$700,000 with a probability of 60% for each of the next three years; remitted to the UK at the end of each year.
Currently GB£1.00 is worth US$1.30.
The expected inflation rates in the two countries over the next four years are 2% in the UK and 4% in the US.
Applying the Purchasing Power Parity Theory, which of the following represents the expected net present value of the project in GP£ (to the nearest whole pound)?
Q is a company which generates electricity from alternative energy sources. It has just begun constructing a wind farm near a well-known beauty spot. The project has been controversial as campaigners say it will be noisy and unsightly.
The campaigners took legal action but lost the case. Some of them have started a campaign of direct action against Q and are physically blocking roads leading to the site and attempting to intimidate Q's staff.
Q has hired a security company to help it to protect its staff.
In relation to the ethics of this scenario, which of the following statements are valid?
R plc is considering an investment of $1,100,000 in a new machine which is expected to have substantial cash inflows over the next five years.
The annual cash flows from this investment and their probability are shown below:
Annual cash flow ($) Probability
200,000 0.4
280,000 0.5
350,000 0.1
At the end of its five-year life, the asset is expected to sell for $100,000. The cost of capital is 5%.
What is the Expected Net Present Value?
Give your answer to the nearest whole $.
C Ltd is a private, family-owned company which is hoping to become listed on a recognised Stock Exchange within the next two years. At the moment, the Board of Directors comprises five directors; four of whom are from the founding family and all of whom are involved in the day-to-day running of the business. The remaining director obtained a seat on the Board three years ago as a condition of an investment by a venture capital fund.
The Board meets in half-day sessions once a fortnight and the Board meetings are reasonably well run. All decisions are taken by the Board as a whole. There are no sub-committees.
Which of the following steps would it be appropriate for C Ltd to take in the light of the proposed listing?
JKL is a retailer with more than 45 shops around the country. The directors suspect that a serious fraud has occurred at one of the branches and a team of internal auditors has been sent to investigate
An analytical review investigation shows that sales revenue is in line with budget, but overtime payments to shop staff exceed budget by 20%.
How should the internal audit team proceed?
Company N is considering opening another production plant in Northland, a country 2000 km from its current production plant location N would also sell its products in Northland
Which TWO of the following are business risks'
In-depth analysis showing the identification and quantification of exposure to financial risk has become more accessible in recent years. Several varieties of analysis are now available.
Which of the following statements are true?
DFG is the largest bridge-building company in its home country, H. DFG works exclusively for the government of country H and the government awards DFG 80% of the contracts to build new bridges.
DFG's directors are considering using the big data approach to identify opportunities to increase sales revenues and profit.
Which of the following statements are true?
Which of the following best describes the conflict between maximising profit and maximising shareholder wealth?
An internal audit investigation involved conducting compliance tests on the processing of purchase invoices.
The purchase ledger clerk compares invoices against purchase orders and passes them for payment The invoices are then input into a computerised purchase ledger system The system checks that the supplier has a valid purchase ledger account, as authorised by the chief buyer, before crediting the supplier's account with the value of the invoice.
The internal auditor checked a sample of recorded purchase invoices against their corresponding purchase orders The internal auditor found four cases where invoices could not be agreed to corresponding purchase orders.
What is the potential significance of this compliance error?
