考文垂大学商科课程财务报表分析2011冬季考试卷

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1、January2011CoventryUniversityFacultyBusinessEnvironmentandSocietyM17EFAFinancialStatementAnalysisandValuationInstructionstocandidatesTimeallowed:2hoursThepaperiscomprisedofthreequestions.Allquestionsarecompulsoryandcarryequalmarks(30marksperquestion).Allworkingsshouldbeshown.Wherecalcu

2、lationsarerequiredusingformulae,calculatorsmaybeusedbutstepsintheworkingsmustbeshown.Calculationswithnoevidenceofthis(forexample,usingthescientificfunctionsofcalculators)willreceivenocredit.Candidatesarerequiredtoanswerallthreequestions.PVtablesareattachedtothebackofthisexampaper.Youma

3、ytakethisquestionpaperawayattheendoftheexamination.Question1Underworldpicisamanufacturerofcomputergames・Itiscurrentlyfinancedbyamixtureofdebtandequityasfollows:Bookvalue£000s1million£1ordinaryshares1,000Retainedearnings1,97810,000£1009.5%irredeemabledebentures1,000Loanrepayablein2025at

4、16%fixedinterestrate250Themarketpriceofordinarysharesis£3.35,andthedebentureshaveamarketpriceof£94.Thecompanypayscorporationtaxatarateof20%.Thecurrentreturnongovernmentsecuritiesis4%,theaveragestockmarketrateofreturnis8%andthecompanyhasabetavalueof1.25.AnopportunityhasarisentoacquireFr

5、eshcoLimited,asmallcompanyoperatinginthesameindustry.ItisforecastthatFreshcoLtdwillgenerateacashflowof£300,000inthefirstyearfollowingacquisition.Thisisforecasttoincreaseby10%ayearforthenextfouryearsafterwhichcashflowswilldeclineto£350,000forthenexttwoyears.Duetothedynamic,constantlycha

6、ngingnatureofthissector,cashflowsafterthisareconsideredtoounreliabletoforecast.FreshcoLtdhas1.5millionordinarysharescurrentlytradingonthestockmarketatapriceof85penceeach.Italsohasdebtof£500,000.ThedirectorsofUnderworldpicusethecompany'sweightedaveragecostofcapitaltoappraiseinvestmentop

7、portunities・•Requirementa)CalculateUnderworld5sweightedaveragecostofcapital(WACC).(10marks)a)UsingdiscountedcashflowsandUnderworld'sWACC,calculatethetotalbusinessvalueandshareholdervalueofFreshcoLtd.(12marks)b)Basedonyourcalculationsrecommend,withreasons,whetherUnderworldpicshouldpur