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MFRP1209

1.43 MFRP

Management of Financial Resources and Performance morning 4 December 2009

1 Time allowed: 3 hours. 2 Answer any FOUR questions. 3 All questions carry 25 marks. Marks for subdivisions of questions are shown in brackets. 4 No books, dictionaries, notes or any other written materials are allowed in this examination. 5 Calculators, including scientiﬁc calculators, are allowed providing they are not programmable and cannot store or recall information. Electronic dictionaries and personal organisers are NOT allowed. 6 Present value and annuity tables are included in this question paper on pages 7 and 8. Formulae can be found on pages 9 and 10. 7 Candidates who break ABE regulations, or commit any misconduct, will be disqualiﬁed from the examinations. 8 Question papers must not be removed from the Examination Hall.

MFRP1209

© ABE 2009

D/502/3188

Answer any FOUR questions Q1 Three companies A, B and C are engaged in the same type of business in the UK. The business is in a highly sensitive and cyclical market and past experience shows that earnings before interest and tax are liable to ﬂuctuate by up to 25% in either direction from the current level. Each company has almost identical total funds employed and proﬁtability, but signiﬁcantly different capital structure. The capital structure of the three companies is as follows: Company A 2,700,000 Ordinary Shares (Nominal value of 40p) Reserves £ 1,080,000 4,080,000 ––––––––– £5,160,000

Company B 4,360,000 Ordinary Shares (Nominal value of 25p) Reserves 10% Debenture Stock repayable 2012-2014 £ 1,090,000 2,910,000 1,000,000 ––––––––– £5,000,000

Company C 2,080,000 Ordinary Shares (Nominal value of 50p) Reserves 1 7–% Unsecured Loan Stock repayable 2010 2 £ 1,040,000 1,060,000 3,000,000 ––––––––– £5,100,000

The…...

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