Question 1

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 $.

Options :

A : C

Answer:

Question 2

Company W produces mobile phone components and has recently tendered for a substantial contract. The results of the tendering process will not become available until three months from now. If the company is successful it will require 2,000 units of a commodity which is currently traded in an open commodity market for $740 per unit. However, there has been speculation that this commodity could increase substantially in price over the next three months and so the company is considering purchasing the commodity now and storing it for three months.
The funds to buy the commodity would be borrowed at an annual interest rate of 7% and the storage cost of the product would be $5.40 per unit per month. The storage costs would be paid at the end of the three month storage period.
Which of the following represents the gain or loss (to the nearest thousand dollars) that will accrue to Company W assuming that the price of the commodity rises to $800 in three months' time?

Options :

A : $62,000 gain

B : $95,000 gain

C : $88,000 gain

D : $16,000 loss

Answer: A

Question 3

You have been assigned the role of lead internal auditor. Your task is to carryout the annual assessment of the production line maintenance department.
When planning for this audit, which of the following must be completed?

Options :

A : Prepare the report.

B : Establish whether the controls are adequate or not.

C : Decide how the controls will be tested.

D : Learn all about the systems and controls in the department.

E : Carefully consider any control weaknesses that are reported.

F : Review previous audit findings for the department.

Answer: A,C,D

Question 4

Which TWO of the following scenarios should be considered in strategic scenario planning by a publishing company that specialises in academic textbooks?

Options :

A : There could be a change in the technology used by consumers, such as smaller mobile phones with smaller screens

B : Budget changes could have an impact on the funding available to college and university libraries

C : The terms offered by media companies for film rights for books could change

D : The quality of output from printing presses might improve

E : Environmental concerns could lead to a decrease in the availability of trees to make paper

Answer: B,C

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

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