Forum Replies Created
- Posts
However, both would usually be included in a project initiation document…correct?
Thank you
Benefits Management takes place throughout the project. Potential benefits are firstly identified and quantified e.g. financial, observable etc… They are assessed in terms of the overall strategy i.e. why are they being purseued, what will the organization gain from these benefits. A Benefits Realization Network is then considered. This will basically provide you with the necessary change action to obtain the benefits. Here change and benefit owners are given responsibility. Execution begins (i.e. the project work begins) and benefits are reassessed. Some benefits will no longer be achievable and others may not be needed. so they are dropped. Likewise other benefits may be pursued. at the end of the project a post implementation review is undertaken to assess what benefits were realized or missed. Unexpected benefits are also documented here. Benefits management takes place throughout the project not simply at the end. From initial benefit analysis to monitor/control and evaluation. It is an important part of project management as without benefits the project would never be initiated.
I hope that helps.
generally using 5% and 10% works in the majority of questions. If the interest rate is say 15% then maybe using 10% and 20% would be more appropriate. It doesn’t really matter which ones you use…as you still come back to the same value more or less. But do try and use a discount rate that will give a positive and then a negative PV.
I hope that helps
If the project ends add working capital back. If it doesn’t end e.g cash flows will continue in perpetuity then don’t add it back.
License fee on a physical asset can be capitalized. Capitalized items receive tax benefits.
Put the petty cash vouchers on numeric slips. This was you can ensure that all slips are processed. What if a petty cash voucher is very big…another signature maybe by the head of finance?? How do you check that the departmental manager has actually approved? do you have an approval database of signatures, is this updated at least once a month with limits etc…?
I think it depends on who the investor is. If the investor is European then the answer would be correct but if the investor is from the US then your answer is correct. I’m not 100% on this one but I’m pretty sure that’s how it works ; )
Hi Kodwo,
There’s two ways you can look at this
1) “Bank Buys High – sounds like bye bye” “Bank Sells Low sounds like hello” = so if the company wants to buy then the bank will sell and do so at the low rate.
2) or calculate it = lets say company wants $100 so the company will buy and the bank will sell. The bank can sell at $100/€1.3520 and get €73.96 or it can sell at the high rate = $100/€1.3540 and get €73.85. Clearly the bank will want the higher proceeds and will therefore sell at the low rate.
Yeah I don’t know why researchers spend so much time on theories that don’t relate to the real world. M&M came up with this marvelous concept on financial management. They said that shareholder wealth is only affected by the investment decision and not the dividend or financing decision under the condition that capital markets were perfect. As Barbara pointed out above the financial decision to use debt or equity is not important. Likewise the dividend irrelevant theory states that paying a dividend or not does’t effect shareholder wealth assuming that there is full information.
But we don’t live in perfect capital markets; we don’t have freedom of information and we do pay tax. Hence M&M quickly carried out another study this time using tax. But this is still flawed as companies don’t gear up like headless chickens as Insolvency risk and finance pressures quite rightly have a say in this.
and to expand;
1. if it doesn’t have the same business risk then you should use a project specific discount rate using CAPM. Ungearing/regearing etc…
2. I don’t think this is quite right. You can use WACC as a discount rate on large projects assuming the business and financial risk are the same. WACC is still appropriate on smaller projects if the risks are different. I may be incorrect but I’m pretty sure that this was an “or” and not an “and” in the Kaplan text book
3. If the existing capital structure is not maintained then you should consider adjusting the AC by the MCI hope that this helps
c’mon guys your keeping me in suspense ; ) – was Q1 consolidated statement of financial position only…. or did you have to do the income statement as well!!!
cheers
Hi,
cph85
1) After we find the theoretical rights price (£3.60) We multiply by 3.80/3.60 as this is part of the standard process. I don’t know why we do this but it must always be done i.e. it is not specific just to this question.2)yes the 75% is the income tax adjustment. A better way to understand it would be do increase earnings by the interest (£800,000) on the nominal value of the convertible loan (i.e. £10,000,000) and deduct from earnings the tax on the interest i.e. £800,000 x 25%
3) I don’t really understand why we calculate comparatives as we do however by inverting £3.80/£3.60 so it becomes £3.60/£3.80 has always worked for me when dealing with right issues.
enes78
This is a good question. Kaplan seem to imply that we use the weighted average as IAS 33 dictates that we do. I don;t know why the 2006 paper did it differently but it could be that the IAS was amended. If it’s any consolation I have worked through a lot of recent and amended practice questions and they all seem to have used the weighted average
This is a good question. Again the book doesn’tyou haven’t gone wrong. Subsidiary to parent is the same logic as parent to subsidary.
What is balance outstanding at year end… does this relate to the trade and receivable accountsI will be using abbreviations. The paper is quite time pressured. The examiners will know what I/S SFP etc… stand for
ROCE, ROE, PM, net PM, Asset Turnover, Interest Cover, Dividend cover, dividend yield, Payable days, receivable days, inventory days and gearing.
These should be applied to ascertain the underlying performance of an entity. hence if the entity acquired a subsidiary, you should apply the ratios as if they hadn’t acquired the subsidiary and compare to last year. However, must make comments on the acquisition and what it has done to the ratios. Same goes for discontinued operations. Apply the above ratios on continuing operations only and pass comment on the discontinued operation. Ratios are used to confirm the underlying performance and should not be distorted by ad hoc transactions (i.e. acquiring a sub, reorganization costs etc….)
because there was no cash movement. Loan notes have remained static. Loan notes are not cash equivalents
the loan note is very simple. When consolidating add together the loan notes of the parent and subsidiary in the SFP. Subtract 0.5x(the balance of the 10% loan note). We subtract this as it is Intra group trading and hence must be eliminated from the SFP.
There is another situation when the exam states that the parent gave e.g. £100 bonds/loan notes to the shareholders of the subsidiary. In this instance we account for it as part of the cost.
It’s one of personal choice.
For both questions I start with the I/S and SFP. I lay them out. I put down what I can. I then move onto the workings. Leave a page for the proformas!!
There’s £50000 of equity shares – Each share costs 20p. Hence the total number of shares is 250,000 (after the issue)
The issue at 1 for 4 was for [250000 x (1/5)] = 50000 sharesThe rights issue: 42p per share. The nominal value is 20p. Share capital is 0.2 x 50000 and share premium = (0.42-0.2) x 50000 = 11000 (shown in the TB)
The dividends paid at 3p per share should be for 200000 shares
The dividends paid at 5p per share should be for 250000 shares (i.e. as there are more in issue)I’m not 100% sure but I don’;t think dividends are pro rated into months. Anyway once you have calculated the above you will have the total dividend payment. Subtract this from Admin expenses as dividends do not belong here. Put it against retained earnings in the SFP or in your statement of changes in equity
Well if the development expenditure is capitalized the only thing that hits the I/S will be the amortization for the year.
Therefore when doing cash flows (operating activities) you have to add back the amortization charge (for he period it was amortized in the year) to operating profit.The costs of developing the new product would decrease cash flow so you need to take account of this in investing activities.
I hope that this helps. Also please correct me if I am mistaken.