ACCA考试模拟试题会计师与企业1docWord文档格式.docx

ACCA考试模拟试题会计师与企业1docWord文档格式.docx

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partsandfridges.Ithasbeenmanufacturingpartsfordomesticrefrigerationandairconditioningsystemsforanumberofyears,whichitsellstoproducersoffridgesandairconditionersworldwide.Italsosellsaround50%ofthepartsitmanufacturestoitsfridgeproductiondivision.Itstartedproducingandsellingitsownbrandoffridgesafewyearsago.Afterlimitedinitialsuccess,competitioninthefridgemarketbecameverytoughandrevenueandprofitshavebeendeclining.Withoutfurtherinvestmenttherearecurrentlyfewgrowthprospectsineitherthepartsorthefridgedivisions.DoricCoborrowedheavilytofinancethedevelopmentandlaunchofitsfridges,andhasnowreacheditsmaximumoverdraftlimit.Themarketshavetakenapessimisticviewofthecompanyanditssharepricehasdeclinedto50cpersharefromahighof$2.85persharearoundthreeyearsago.

Extractsfromthemostrecentfinancialstatements:

AsurveyfromtherefrigerationandairconditioningpartsmarkethasindicatedthatthereispotentialforDoricCotomanufacturepartsformobilerefrigerationunitsusedincargoplanesandcontainers.Ifthisventuregoesaheadthenthepartsdivisionbefore-taxprofitsareexpectedtogrowby5%peryear.Theproposedventurewouldneedaninitialone-offinvestmentof$50million.

Suggestedproposals

TheBoardofDirectorshasarrangedforameetingtodiscusshowtoproceedandisconsideringeachofthefollowingproposals:

1.Toceasetradingandclosedownthecompanyentirely.

2.Toundertakecorporaterestructuringinordertoreducethelevelofdebtandobtaintheadditionalcapitalinvestmentrequiredtocontinuecurrentoperations.

5.Toclosethefridgedivisionandcontinuethepartsdivisionthroughaleveragedmanagementbuy-out,involvingsomeexecutivedirectorsandmanagersfromthepartsdivision.Thenewcompanywillthenpursueitsoriginalpartsbusinessaswellasthedevelopmentofthepartsformobilerefrigerationbusiness,describedabove.Allthecurrentandlong-termliabilitieswillbeinitiallyrepaidusingtheproceedsfromthesaleofthefridgedivision.Thefinanceraisedfromthemanagementbuy-outwillpayforanyremainingliabilities,theadditionalcapitalinvestmentrequiredtocontinueoperationsandre-purchasethesharesatapremiumof20%.

Thefollowinginformationhasbeenprovidedforeachproposal:

Ceasetrading

Corporaterestructuring

Theexistingordinaryshareswillbecancelledandordinaryshareholderswillbeissuedwith40millionnew$1ordinarysharesinexchangeforacashpaymentatpar.Theexistingunsecuredbondswillbecancelledandreplacedwith270millionof$1ordinaryshares.Thebondholderswillcontribute$90millionincash.Alltheshareswillbelistedandtraded.Thebankoverdraftwillbeconvertedintoasecuredten-yearloanwithafixedannualinterestrateof7%.Theotherunsecuredloanswillberepaid.Inadditiontothis,thedirectorsoftherestructuredcompanywillget4million$1shareoptionsforanexercisepriceof$1.10,whichwillexpireinfouryears.

Anadditionalone-offcapitalinvestmentof$80millioninmachineryandequipmentisnecessarytoincreasesalesrevenueforbothdivisionsby7%,withnochangetothecosts.Aftertheone-off7%growth,saleswillcontinueatthenewlevelfortheforeseeablefuture.

ItisexpectedthattheDoric'

scostofcapitalratewillreduceby550basispointsfollowingtherestructuringfromthecurrentrate.

Managementbuy-out

Thepartsdivisionishalfthesizeofthefridgedivisionintermsoftheassetsandliabilitiesattributabletoit.Ifthemanagementbuy-outproposalischosen,aprorataadditionalcapitalinvestmentwillbemadetomachineryandequipmentonaone-offbasistoincreasesalesrevenueofthepartsdivisionby7%.Salesrevenuewillthencontinueatthenewlevelfortheforeseeablefuture.

Allliabilitiescategorieshaveequalclaimforrepaymentagainstthecompany'

sassets.

ItisexpectedthatDoric'

scostofcapitalratewilldecreaseby100basispointsfollowingthemanagementbuy-outfromthecurrentrate.

Thefollowingadditionalinformationhasbeenprovided:

Redundancyandothercostswillbeapproximately$54millionifthewholecompanyisclosed,andprorataforindividualdivisionsthatareclosed.Thesecostshavepriorityforpaymentbeforeanyotherliabilitiesincaseofclosure.Thetaxationeffectsrelatingtothismaybeignored.

Corporationtaxonprofitsis20%andlossescannotbecarriedforwardfortaxpurposes.Assumethattaxispayableintheyearincurred.

Allthenon-currentassets,includinglandandbuildings,areeligiblefortaxallowabledepreciationof15%annuallyonthebookvalues.Theannualreinvestmentneededtokeepoperationsattheircurrentlevelsisroughlyequivalenttothetaxallowabledepreciation.The$50millioninvestmentinthemobilerefrigerationbusinessisnoteligibleforanytaxallowabledepreciation.

Doric'

scurrentcostofcapitalis12%.

Required:

PrepareareportfortheBoardofDirectors,evaluatingthefinancialandnon-financialimpactofallthethreeproposalstoDoricCo'

smainstakeholdergroups,thatincludes:

（i）AnestimateofthereturnthedebtholdersandshareholderswouldreceiveintheeventthatDoricCoceasestradingandiscloseddown.（5marks）

（ii）AnestimateoftheincomepositionandthevalueofDoricCointheeventthattherestructuringproposalisselected.Stateanyassumptionsmade.（8marks）

（iii）AnestimateoftheamountofadditionalfinanceneededandthevalueofDoricCoifthemanagementbuy-outproposalisselected.Stateanyassumptionsmade.（8marks）

（iv）Adiscussionoftheimpactofeachproposalontheexistingshareholders,theunsecuredbondholders,andtheexecutivedirectorsandmanagersinvolvedinthemanagementbuy-out.Suggestwhichproposalislikelytobeselected.（12marks）

Professionalmarkswillbeawardedinquestion1fortheappropriatenessandformatofthereport.（4marks）

（55marks）

2FubukiCo,anunlistedcompanybasedinMegaera,hasbeenmanufacturingelectricalpartsusedinmobilityvehiclesforpeoplewithdisabilitiesandtheelderly,formanyyears.ThesepartsareexportedtovariousmanufacturersworldwidebutatpresenttherearenolocalmanufacturersofmobilityvehiclesinMegaera.RetailersinMegaeranormallyimportmobilityvehiclesandsellthematanaveragepriceof$4,000each.FubukiCowantstomanufacturemobilityvehicleslocallyandbelievesthatitcansellvehiclesofequivalentqualitylocallyatadiscountof57.5%tothecurrentaverageretailprice.

AlthoughthisisacompletelynewventureforFubukiCo,itwillbeinadditiontothecompany'

scorebusiness.FubukiCo'

sdirectorsexpecttodeveloptheprojectforaperiodoffouryearsandthensellitfor$16milliontoaprivateequityfirm.Megaera'

sgovernmenthasbeenpositiveabouttheventureandhasofferedFubukiCoasubsidisedloanofupto80%oftheinvestmentfundsrequired,atarateof200basispointsbelowFubukiCo'

sborrowingrate.CurrentlyFubukiCocanborrowat500basispointsabovethefive-yeargovernmentdebtyieldrate.

Afeasibilitystudycommissionedbythedirectors,atacostof$250,000,hasproducedthefollowinginformation.

1.Initialcostofacquiringsuitablepremiseswillbe$11million,andplantandmachineryusedinthemanufacturewillcost$5million.Acquiringthepremisesandinstallingthemachineryisaquickprocessandmanufacturingcancommencealmostimmediately.

2.Itisexpectedthatinthefirstyear1,500unitswillbemanufacturedandsold.Unitsaleswillgrowby40%ineachofthenexttwoyearsbeforefallingtoanannualgrowthrateof5%forthefinalyear.Afterthefirstyearthesellingpriceperunitisexpectedtoincreaseby5%peryear.

5.Inthefirstyear,itisestimatedthatthetotaldirectmaterial,labourandvariableoverheadscostswillbe$1,200perunitproduced.Afterthefirstyear,thedirectcostsareexpectedtoincreasebyanannualinflationrateof8%.

4.Annualfixedoverheadcostswouldbe$2.5millionofwhich60%arecentrallyallocatedoverheads.Thefixedoverheadcostswillincreaseby5%peryearafterthefirstyear.

5.FubukiCowillneedtomakeworkingcapitalavailableof15%oftheanticipatedsalesrevenuefortheyear,atthebeginningofeachyear.Theworkingcapitalisexpectedtobereleasedattheendofthefourthyearwhentheprojectissold.

FubukiCo'

staxrateis25%peryearontaxableprofits.Taxispayableinthesameyearaswhentheprofitsareearned.Taxallowabledepreciationisavailableontheplantandmachineryonastraight-linebasis.Itisanticipatedthatthevalueattributabletotheplantandmachineryafterfouryearsis$400,000ofthepriceatwhichtheprojectissold.Notaxallowabledepreciationisavailableonthepremises.

FubukiCouses8%asitsdiscountratefornewprojectsbutfeelsthatthisratemaynotbeappropriateforthisnewtypeofinvestment.Itintendstoraisethefullamountoffundsthroughdebtfinanceandtakeadvantageofthegovernment'

sofferofasubsidisedloan.Issuecostsare4%ofthegrossfinancerequired.Itcanbeassumedthatthedebtcapacityavailabletothecompanyisequivalenttotheactualamountofdebtfinanceraisedfortheproject.

AlthoughnoothercompaniesproducemobilityvehiclesinMegaera,HaizumCo,alistedcompany,produceselectrical-poweredvehiclesusingsimilartechnologytothatrequiredforthemobilityvehicles.HaizumCo'

scostofequityisestimatedtobe14%anditpaystaxat28%.HaizumCohas15millionsharesinissuetradingat$2.55e