分类： ACCA特许公认会计师考试题库

ACCA F4（China）历年试题大全（2002年-2008年）

8 For the purpose of expanding his business, Mr Zhang borrowed RMB 100,000 yuan from Mr Lee and would provide
a mini-bus as the pledge to Mr Lee. However, Mr Lee returned the mini-bus to Mr Zhang because he did not hold a
driver’s licence.
Subsequently, Mr Zhang borrowed another RMB 100,000 yuan from Mr Wang and put the mini-bus as the pledge
to Mr Wang. After the conclusion of the loan agreement and pledge agreement, Mr Zhang delivered the mini-bus to
Mr Wang.
During the period of his possession of the mini-bus, Mr Wang concluded a rental agreement with a transport company
without the advance consent of Mr Zhang. The mini-bus was put into transportation service by the transport company
but was totally destroyed in a traffic accident.
Upon the expiration of the loan agreement, Mr Zhang came to repay the principal and interest. However Mr Wang
could not return the pledged mini-bus to him.
Required:
Answer the following questions in accordance with the relevant provisions of the Property Law of China and give
your reasons for your answer:
(a) explain whether the pledge agreement between Mr Zhang and Mr Lee came into effect; (3 marks)
(b) explain what the legal relationship between Mr Zhang and Mr Wang was; (2 marks)
(c) explain whether Mr Wang was entitled to lease the mini-bus to the transport company; and (2 marks)
(d) explain against whom Mr Zhang should act in law for the recovery of the mini-bus. (3 marks)
(10 marks)

9 Since Hongyan Mechanical Engineering Co Ltd (Hongyan Co) could not settle the huge amount of debts due, its
creditors applied for bankruptcy in the competent people’s court. The court accepted the application of the creditors
and declared the bankruptcy of Hongyan Co. The court designated a bankruptcy administrator to be in charge of the
bankruptcy liquidation. During the process of bankruptcy liquidation, the bankruptcy administrator formulated a list
of bankruptcy assets, debts due and declared credits.
(a) the appraised bankruptcy assets of Hongyan Co were as follows:
(i) Office building – appraised value of RMB 2,400,000 yuan, mortgaged for a loan borrowed from the
Communication Bank.
(ii) Investment to a mutual fund – RMB 1,400,000 yuan.
(iii) A rental receivable from Company A – RMB 1,900,000 yuan.
(iv) Giving up a creditor’s right due 10 months before the bankruptcy of Hongyan Co – RMB 1,000,000 yuan.
(b) the declared credits by Hongyan Co’s creditors were as follows:
(i) Communication Bank’s loan – principal RMB 2,000,000 yuan with 10% of annual interest rate for two
years.
(ii) Company A’s credit due – RMB 7,000,000 yuan.
(iii) Company B’s credit under a sales contract payable by Hongyan Co – RMB 1,500,000 yuan.
(iv) Company C’s damages due to the termination of contract by the bankruptcy administrator –
RMB 1,400,000 yuan.
Required:
Answer the following questions in accordance with the relevant provisions of the Enterprise Bankruptcy Law of
China and give your reasons for your answer:
(a) state which creditor should be satisfied in the priority order in the allocation of the bankruptcy assets;

ACCA F4（English）历年试题大全（2002年-2008年）

9 Clare, Dan and Eve formed a partnership 10 years ago, although Clare was a sleeping partner and never had anything
to do with running the business. Last year Dan retired from the partnership. Eve has subsequently entered into two
large contracts. The first one was with a longstanding customer Greg, who had dealt with the partnership for some
five years. The second contract was with a new customer Hugh. Both believed that Dan was still a partner in the
business. Both contracts have gone badly wrong leaving the partnership owing ￡50,000 to both Greg and Hugh.
Unfortunately the business assets will only cover the first ￡50,000 of the debt.
Required:
Explain the potential liabilities of Clare, Dan, and Eve for the partnership debts.

10 Sid is a director of two listed public companies in which he has substantial shareholdings: Trend plc and Umber plc.
The annual reports of both Trend plc and Umber plc have just been drawn up although not yet disclosed. They show
that Trend plc has made a surprisingly big loss and that Umber plc has made an equally surprising big profit. On the
basis of this information Sid sold his shares in Trend plc and bought shares in Umber plc. He also advised his brother
to buy shares in Umber plc.
Vic who is also a shareholder in both companies sold a significant number of shares in Umber plc only the day before
its annual report was published.
Required:
(a) Analyse the above scenario from the perspective of the law relating to insider dealing; (8 marks)
(b) In particular advise Vic as to his position.

ACCA F5历年试题大全（2002年-2008年）

包含（2002年-2008年）ACCA F5历年考试真题及答案，文件列表如下：
Dec-2002.PDF、Dec-2003.PDF、Dec-2004.PDF、Dec-2005.PDF、Dec-2006.PDF、Dec-2007.PDF、Dec-2008.PDF；
June-2003.PDF、June-2004.PDF、June-2005.PDF、June-2006.PDF、June-2007.PDF、June-2008.PDF；

1 The consultant’s report has highlighted the need to modernise the IS department through the use of project
management software and CASE tools.
(a) Describe the features and functions of project management software and explain the advantages of such
software in the context of the Accashire Bank IS department and the consultant’s modernisation comments.
(10 marks)
(b) Describe the features and functions of CASE tools and explain the advantages of such software in the context
of the Accashire Bank IS department and the consultant’s modernisation comments. (10 marks)
(20 marks)
2 The consultant has suggested that part of the modernisation should be to reorganise the strict hierarchical structure
of the IS department into a flat project-team based structure. She has also recommended the formal sign-off of system
requirements and specifications.
(a) Explain what she means by a flat, project-team based structure. (6 marks)
(b Explain TWO advantages of using this structure in an IS department. (6 marks)
(c) Explain the implications of the proposed formal sign-off of system requirements and specifications:
(i) From the perspective of user departments; (4 marks)
(ii) From the perspective of the IS department.
3 The consultant’s report also suggests two ways of improving productivity through the use of Fourth Generation
Languages and ‘off-the-shelf’ software packages.
(a) Explain what is meant by a Fourth Generation Language. (4 marks)
(b) Briefly describe TWO features or functions of a Fourth Generation Language which would benefit end-users
at Accashire Bank. (6 marks)
(c) Briefly explain why ‘time to implementation’ and ‘quality’ are perceived as advantages of the software
package approach. (6 marks)
(d) Comment on the consultant’s suggestion that tailoring packages is an effective and efficient method of
delivering strategic benefits.
4 Managing Information Systems
A City Council is currently reviewing the way it accounts for the cost of its IT department. Currently the IT department
is a non-rechargeable cost centre with user departments (such as Housing and Social Services) having free, unlimited
access to the services and resources of the IT department. However, the chief executive of the City Council has
concerns about this approach and is currently considering a number of ways of cross-charging user departments for
the IT resources they use. The IT director of the City Council would prefer to establish the IT department as a separate
company, providing hardware and software services to local companies as well as the City Council.
Required:
(a) Briefly describe TWO disadvantages to the City Council of the current policy of treating IT as a nonrechargeable
cost centre. (4 marks)
(b) Briefly explain the general principles and benefits of cross-charging the IT department costs to user
departments. (4 marks)
(c) Two ways of cross-charging costs are currently being considered:
– Recharged at cost
– Recharged at a mark up (profit centre)
(i) Briefly describe the principles of each approach. (4 marks)
(ii) Briefly describe ONE disadvantage of each approach as a way of cross-charging costs. (4 marks)
The IT director of the City Council is keen to establish the IT department as a separate company providing software
services to organisations outside the City Council.
(d) Briefly describe ONE advantage and ONE disadvantage to the Council of establishing the IT department as
a separate company.

ACCA F6（China）历年考试真题及答案大全（2004年-2008年）

包含（2004年-2008年）ACCA F6（China）历年考试真题及答案，文件列表如下：
Dec-2004.PDF、Dec-2005.PDF、Dec-2006.PDF、Dec-2007.PDF、Dec-2008.PDF；
June-2004.PDF、June-2005.PDF、June-2006.PDF、June-2007.PDF、June-2008.PDF；

The following tax rates and allowances are to be used in answering the questions:
Tax Rates
Income tax for domestic enterprises
Annual taxable income rate
111,111 – 30,000 yuan 18%
130,001 – 100,000 yuan 27%
100,001 yuan and above 33%
Preferential tax rates:
High-tech enterprises established in high-tech development zones 15%
Newly set up enterprises may be exempted from income
tax for two years from its first production
Services provided to agriculture 0%
Technical services provided by universities and research institutions 0%
Newly set up consultant enterprises 2 years’ tax exemption from its establishment
Newly set up transportation or
communication enterprises 1 year tax exemption then 1 year at 50% of
the original tax rate from its establishment
Newly set up service enterprises 1 year tax exemption or deduction with the
approval of the tax authorities
Income tax for joint ventures and foreign enterprises
For ordinary joint ventures 33% (30% national and 3% local)
Group A lower rate 15%
enterprises in Special Economic Zones and manufacturing enterprises in Economic and Technology Development
Zones
Group B lower rate 24%
manufacturing enterprises in the old urban districts of Special Economic Zones and manufacturing enterprises in
Economic and Technology Development Zones, and in Coastal Open Zones
Income tax rates for individual income tax
For monthly salary rates
the part 1111,1 – 11, 800 yuan 0%
the part 11,801 – 1 1,300 yuan 5%
the part 11,301 – 1 2,800 yuan 10%
the part 12,801 – 1 5,800 yuan 15%
the part 15,801 – 20,800 yuan 20%
the part 20,801 – 40,800 yuan 25%
the part 40,801 – 60,800 yuan 30%
the part 60,801 – 80,800 yuan 35%
the part 80,801 – 100,800 yuan 40%
the part 100,801 yuan and above 45%
For other income rate
each time below 800 yuan 0%
each time from 801 to 4,000 yuan 20%
each time above 4,000 yuan (with 20% allowance) 20%
(for the part from 20,000 ~ 50,000 yuan 30%
for the part above 50,000 yuan 40%)
Business tax rate
Group A transportation, construction, communication, culture and sports 3%
Group B hotel, restaurant, tourism, warehouse, advertising, transfer of intangible property,
sale of real estate 5%
Group C finance 5%
Group D recreation 5~20%

ACCA F6（United Kingdom）历年考题及答案大全（2004年-2008年）

包含（2004年-2008年）ACCA F6（United Kingdom）历年考试真题及答案，文件列表如下：
Dec-2004.PDF、Dec-2005.PDF、Dec-2006.PDF、Dec-2007.PDF、Dec-2008.PDF；
June-2004.PDF、June-2005.PDF、June-2006.PDF、June-2007.PDF、June-2008.PDF；

Business Taxation
(UK Stream)

QUESTION PAPER
Time allowed 3 hours
This paper is divided into two sections
Section A BOTH questions are compulsory and MUST be
answered
Section B THREE questions ONLY to be answered
Tax rates and allowances are on pages 2-4
Do not open this paper until instructed by the supervisor
This question paper must not be removed from the examination
hall
The Association of Chartered Certified Accountants

The following tax rates and allowances are to be used in answering the questions:
Income Tax
%
Starting rate ￡1 – ￡2,150 10
Basic rate ￡2,151 – ￡33,300 22
Higher rate ￡33,301 and above 40
Personal Allowance
Personal allowance ￡5,035
Car Benefit Percentage
The base level of CO2 emissions is 140 grams per kilometre.
Car Fuel Benefit
The base figure for calculating the car fuel benefit is ￡14,400.
Pension Scheme Limits
Annual allowance ￡215,000
The maximum contribution that can qualify for tax relief without any earnings is ￡3,600.
Capital Allowances
%
Plant and machinery
Writing-down allowance 25
First-year allowance – Plant and machinery 40
First-year allowance – Low emission motor cars (CO2 emissions of less than
120 grams per kilometre) 100

For small businesses only: the rate of plant and machinery first-year allowance is increased to
50% for the period from 1 April 2006 to 31 March 2007 (6 April 2006 to 5 April 2007 for
unincorporated businesses).
Long-life assets
Writing-down allowance 6
Industrial buildings
Writing-down allowance 4

Corporation Tax
Financial year 2004 2005 2006
Small companies rate 19% 19% 19%
Full rate 30% 30% 30%
Lower limit 1,300,000 1,300,000 1,300,000
Upper limit 1,500,000 1,500,000 1,500,000
Marginal relief fraction 11/400 11/400 11/400
Marginal Relief
(M – P) x I/P x Marginal relief fraction
Value Added Tax
￡
Registration limit 61,000
Deregistration limit 59,000
Rates of Interest
Official rate of interest: 5·0%
Rate of interest on underpaid tax: 6·5% (assumed)
Rate of interest on overpaid tax: 2·25% (assumed)

ACCA F7（International）历年考题及答案大全（2002年-2008年）

包含（2002年-2008年）ACCA F7（International）历年考试真题及答案，文件列表如下：
Dec-2002.PDF、Dec-2003.PDF、Dec-2004.PDF、Dec-2005.PDF、Dec-2006.PDF、Dec-2007.PDF、Dec-2008.PDF；
June-2003.PDF、June-2004.PDF、June-2005.PDF、June-2006.PDF、June-2007.PDF、June-2008.PDF；

Fundamentals Level – Skills Module

Financial Reporting
(International)

Time allowed
Reading and planning: 15 minutes
Writing: 3 hours
ALL FIVE questions are compulsory and MUST be attempted.
Do NOT open this paper until instructed by the supervisor.
During reading and planning time only the question paper may
be annotated. You must NOT write in your answer booklet until
instructed by the supervisor.
This question paper must not be removed from the examination hall.

Section A – This ONE question is compulsory and MUST be attempted
1 Parentis, a public listed company, acquired 600 million equity shares in Offspring on 1 April 2006. The purchase
consideration was made up of:
a share exchange of one share in Parentis for two shares in Offspring
the issue of $100 10% loan note for every 500 shares acquired; and
a deferred cash payment of 11 cents per share acquired payable on 1 April 2007.
Parentis has only recorded the issue of the loan notes. The value of each Parentis share at the date of acquisition was
75 cents and Parentis has a cost of capital of 10% per annum.
The balance sheets of the two companies at 31 March 2007 are shown below:
Parentis Offspring
$ million $ million $ million $ million
Assets
Property, plant and equipment (note (i)) 640 340
Investments 120 nil
Intellectual property (note (ii)) nil 30
—- —-
760 370
Current assets
Inventory (note (iii)) 76 22
Trade receivables (note (iii)) 84 44
Bank nil 160 4 70
—- —- —- —-
Total assets 920 440
—- —-
Equity and liabilities
Equity shares of 25 cents each 300 200
Retained earnings – 1 April 2006 210 120
– year ended 31 March 2007 90 300 20 140
—- —- —- —-
600 340
Non-current liabilities
10% loan notes 120 20
Current liabilities
Trade payables (note (iii)) 130 57
Current tax payable 45 23
Overdraft 25 200 nil 80
—- —- —- —-
Total equity and liabilities 920 440
—- —-
The following information is relevant:
(i) At the date of acquisition the fair values of Offspring’s net assets were approximately equal to their carrying
amounts with the exception of its properties. These properties had a fair value of $40 million in excess of their
carrying amounts which would create additional depreciation of $2 million in the post acquisition period to
31 March 2007. The fair values have not been reflected in Offspring’s balance sheet.
(ii) The intellectual property is a system of encryption designed for internet use. Offspring has been advised that
government legislation (passed since acquisition) has now made this type of encryption illegal. Offspring will
receive $10 million in compensation from the government.
(iii) Offspring sold Parentis goods for $15 million in the post acquisition period. $5 million of these goods are included
in the inventory of Parentis at 31 March 2007. The profit made by Offspring on these sales was $6 million.
Offspring’s trade payable account (in the records of Parentis) of $7 million does not agree with Parentis’s trade
receivable account (in the records of Offspring) due to cash in transit of $4 million paid by Parentis.
(iv) Due to the impact of the above legislation, Parentis has concluded that the consolidated goodwill has been
impaired by $27 million.

ACCA F7（United Kingdom）历年考试真题及答案大全（2002年-2008年）

包含（2002年-2008年）ACCA F7（United Kingdom）历年考试真题及答案，文件列表如下：
Dec-2002.PDF、Dec-2003.PDF、Dec-2004.PDF、Dec-2005.PDF、Dec-2006.PDF、Dec-2007.PDF、Dec-2008.PDF；
June-2003.PDF、June-2004.PDF、June-2005.PDF、June-2006.PDF、June-2007.PDF、June-2008.PDF；

Financial Reporting
(United Kingdom)

Section A – This ONE question is compulsory and MUST be attempted
1 Parentis, a public listed company, acquired 600 million equity shares in Offspring on 1 April 2006. The purchase
consideration was made up of:
a share exchange of one share in Parentis for two shares in Offspring
the issue of ￡100 10% loan note for every 500 shares acquired; and
a deferred cash payment of 11 pence per share acquired payable on 1 April 2007.
Parentis has only recorded the issue of the loan notes. The value of each Parentis share at the date of acquisition was
75 pence and Parentis has a cost of capital of 10% per annum.
The balance sheets of the two companies at 31 March 2007 are shown below:
Parentis Offspring
￡ million ￡ million ￡ million ￡ million
Tangible fixed assets (note (i)) 640 340
Investments 120 nil
Intellectual property (note (ii)) nil 30
—- —-
760 370
Current assets
Stock (note (iii)) 76 22
Trade debtors (note (iii)) 84 44
Bank nil 4
—- —-
160 70
—- —-
Creditors: amounts falling due within one year
Trade creditors (note (iii)) 130 57
Taxation 45 23
Overdraft 25 nil
—- —-
200 80
—- —-
Net current liabilities (40) (10)
Creditors: amounts falling due after more than one year
10% loan notes (120) (20)
—- —-
600 340
—- —-
Capital and reserves:
Equity shares of 25 pence each 300 200
Profit and loss account – 1 April 2006 210 120
– year ended 31 March 2007 90 300 20 140
—- —- —- —-
600 340
—- —-
The following information is relevant:
(i) At the date of acquisition the fair values of Offspring’s net assets were approximately equal to their carrying
amounts with the exception of its properties. These properties had a fair value of ￡40 million in excess of their
carrying amounts which would create additional depreciation of ￡2 million in the post acquisition period to
31 March 2007. The fair values have not been reflected in Offspring’s balance sheet.
(ii) The intellectual property is a system of encryption designed for internet use. Offspring has been advised that
government legislation (passed since acquisition) has now made this type of encryption illegal. Offspring will
receive ￡10 million in compensation from the government.
(iii) Offspring sold Parentis goods for ￡15 million in the post acquisition period. ￡5 million of these goods are included
in the stock of Parentis at 31 March 2007. The profit made by Offspring on these sales was ￡6 million.
Offspring’s trade creditor account (in the records of Parentis) of ￡7 million does not agree with Parentis’s trade
debtor account (in the records of Offspring) due to cash in transit of ￡4 million paid by Parentis.

ACCA F8（International）历年考题及答案大全（2002年-2008年）

包含（2002年-2008年）ACCA F8（International）历年考试真题及答案，文件列表如下：
Dec-2002.PDF、Dec-2003.PDF、Dec-2004.PDF、Dec-2005.PDF、Dec-2006.PDF、Dec-2007.PDF、Dec-2008.PDF；
June-2003.PDF、June-2004.PDF、June-2005.PDF、June-2006.PDF、June-2007.PDF、June-2008.PDF；

Fundamentals Level – Skills Module

Audit and Assurance
(International)

Section A – ALL THREE questions are compulsory and MUST be attempted
1 Green Co grows crops on a large farm according to strict organic principles that prohibits the use of artificial pesticides
and fertilizers. The farm has an ‘organic certification’, which guarantees its products are to be organic. The certification
has increased its sales of flour, potatoes and other products, as customers seek to eat more healthily.
Green Co is run by two managers who are the only shareholders. Annual revenue is $50 million with a net profit of
5%. Both managers have run other businesses in the last 10 years. One business was closed due to suspected tax
fraud (although no case was ever brought to court).
Green Co’s current auditors provide audit services. Additional assurance on business controls and the preparation of
financial statements are provided by a different accountancy firm.
Last year, a neighbouring farm, Black Co started growing genetically modified (GM) crops, the pollen from which
blows over Green Co’s fields on a regular basis. This is a threat to Green Co’s organic status because organic crops
must not be contaminated with GM material. Green Co is considering court action against Black Co for loss of income
and to stop Black Co growing GM crops.
You are an audit partner in Lime & Co, a 15 partner firm of auditors and business advisors. You have been friends
with the managers of Green Co for the last 15 years, advising them on an informal basis. The managers of Green Co
have indicated that the audit will be put out to tender next month and have asked your audit firm to tender for the
audit and the provision of other professional services.
Required:
(a) Using the information provided, identify and explain the ethical threats that could affect Lime & Co.
(8 marks)
(b) In respect of the going concern concept:
(i) Define ‘going concern’ and state two situations in which it should NOT be applied in the preparation of
financial statements; (3 marks)
(ii) Explain the directors’ responsibilities and the auditors’ responsibilities regarding financial statements
prepared on the going concern principle. (4 marks)
(c) List the audit procedures that should be carried out to determine whether or not the going concern basis is
appropriate for Green Co. (5 marks)

ACCA F8（United Kingdom）历年试题大全（2002年-2008年）

包含（2002年-2008年）ACCA F8（United Kingdom）历年考试真题及答案，文件列表如下：
Dec-2002.PDF、Dec-2003.PDF、Dec-2004.PDF、Dec-2005.PDF、Dec-2006.PDF、Dec-2007.PDF、Dec-2008.PDF；
June-2003.PDF、June-2004.PDF、June-2005.PDF、June-2006.PDF、June-2007.PDF、June-2008.PDF；

Audit and Assurance
(United Kingdom)

ALL FIVE questions are compulsory and MUST be attempted
1 Introduction – audit firm
You are an audit senior in Brennon & Co, a firm providing audit and assurance services. At the request of an audit
partner, you are preparing the audit programme for the sales and debtors systems of Seeley Ltd.
Audit documentation is available from the previous year’s audit, including internal control questionnaires and audit
programmes for the despatch and sales system. The audit approach last year did not involve the use of computerassisted
audit techniques (CAATs); the same approach will be taken this year. As far as you are aware, Seeley’s system
of internal control has not changed in the last year.
Client background – sales system
Seeley Ltd is a wholesaler of electrical goods such as kettles, televisions, MP3 players, etc… The company maintains
one large warehouse in a major city. The customers of Seeley are always owners of small retail shops, where electrical
goods are sold to members of the public. Seeley only sells to authorised customers; following appropriate credit
checks, each customer is given a Seeley identification card to confirm their status. The card must be used to obtain
goods from the warehouse.
Despatch and sales system
The despatch and sales system operates as follows:
1. Customers visit Seeley’s warehouse and load the goods they require into their vans after showing their Seeley
identification card to the despatch staff.
2. A pre-numbered goods despatch note (GDN) is produced and signed by the customer and a member of Seeley’s
despatch staff confirming goods taken.
3. One copy of the GDN is sent to the accounts department, the second copy is retained in the despatch
department.
4. Accounts staff enter goods despatch information onto the computerised sales system. The GDN is signed.
5. The computer system produces the sales invoice, with reference to the stock master file for product details and
prices, maintains the sales day book and also the debtors ledger. The debtors control account is balanced by the
computer.
6. Invoices are printed out and sent to each customer in the post with paper copies maintained in the accounts
department. Invoices are compared to GDNs by accounts staff and signed.
7. Paper copies of the debtors ledger control account and list of aged debtors are also available.
8. Error reports are produced showing breaks in the GDN sequence.
Information on debtors
The chief accountant has informed you that debtors days have increased from 45 to 60 days over the last year. The
aged debtors report produced by the computer is shown below:
Number of Range of debt Total debt ￡ Current ￡ 1 to 2 More than 2
debtors months old ￡ months old ￡
15 Less than ￡0 (87,253) (87,253)
197 ￡0 to ￡20,000 2,167,762 548,894 643,523 975,345
153 ￡20,001 to 50,000 5,508,077 2,044,253 2,735,073 728,751
23 ￡50,001 or more 1,495,498 750,235 672,750 72,513
—- ———- ———- ———- ———-
388 9,084,084 3,256,129 4,051,346 1,776,609
—- ———- —- ———- ——————– ——————– ——————–
In view of the deteriorating debtors situation, a direct confirmation of debtors will be performed this year.

ACCA F9历年试题大全（2002年-2008年）

包含（2002年-2008年）ACCA F9历年考试真题及答案，文件列表如下：
Dec-2002.PDF、Dec-2003.PDF、Dec-2004.PDF、Dec-2005.PDF、Dec-2006.PDF、Dec-2007.PDF、Dec-2008.PDF；
June-2003.PDF、June-2004.PDF、June-2005.PDF、June-2006.PDF、June-2007.PDF、June-2008.PDF；

Financial Management
Thursday 5 June 2008

Time allowed
Reading and planning: 15 minutes
Writing: 3 hours
ALL FOUR questions are compulsory and MUST be attempted.
Formulae Sheet, Present Value and Annuity Tables are on
pages 6, 7 and 8.
Do NOT open this paper until instructed by the supervisor.
During reading and planning time only the question paper may
be annotated. You must NOT write in your answer booklet until
instructed by the supervisor.
This question paper must not be removed from the examination hall.

ALL FOUR questions are compulsory and MUST be attempted
1 Burse Co wishes to calculate its weighted average cost of capital and the following information relates to the company
at the current time:
Number of ordinary shares 20 million
Book value of 7% convertible debt $29 million
Book value of 8% bank loan $2 million
Market price of ordinary shares $5·50 per share
Market value of convertible debt $107·11 per $100 bond
Equity beta of Burse Co 1·2
Risk-free rate of return 4·7%
Equity risk premium 6·5%
Rate of taxation 30%
Burse Co expects share prices to rise in the future at an average rate of 6% per year. The convertible debt can be
redeemed at par in eight years’ time, or converted in six years’ time into 15 shares of Burse Co per $100 bond.
Required:
(a) Calculate the market value weighted average cost of capital of Burse Co. State clearly any assumptions that
you make. (12 marks)
(b) Discuss the circumstances under which the weighted average cost of capital can be used in investment
appraisal. (6 marks)
(c) Discuss whether the dividend growth model or the capital asset pricing model offers the better estimate of
the cost of equity of a company. (7 marks)

2 THP Co is planning to buy CRX Co, a company in the same business sector, and is considering paying cash for the
shares of the company. The cash would be raised by THP Co through a 1 for 3 rights issue at a 20% discount to its
current share price.
The purchase price of the 1 million issued shares of CRX Co would be equal to the rights issue funds raised, less
issue costs of $320,000. Earnings per share of CRX Co at the time of acquisition would be 44·8c per share. As a
result of acquiring CRX Co, THP Co expects to gain annual after-tax savings of $96,000.
THP Co maintains a payout ratio of 50% and earnings per share are currently 64c per share. Dividend growth of 5%
per year is expected for the foreseeable future and the company has a cost of equity of 12% per year.
Information from THP Co’s statement of financial position: