Question 1

The International Integrated Reporting Council (IIRC) was formed in August 2010 and brings together a

cross-section of representatives from a wide variety of business sectors.

The primary purpose of the IIRC's framework is to help enable an organsation to communicate how it:

Options :

A : minimises the environmental impact of its business processes.

B : creates value in the short, medium and long term.

C : contributes positively to the economic well being of the environment in which it operates.

D : ensures that the conflicting needs of different stakeholder groups are met in an optimal manner.

Answer: B

Question 2

A listed company in a high technology industry has decided to value its intellectual capital using the

Calculated Intangible Value method (CIV).

Relevant data for the company:

• Pays corporate income tax at 30%

• Cost of equity is 9%, pre-tax cost of debt is 7% and the WACC is 8%

• The value spread has been calculated as $26 million

Calculate the CIV for the company.

Options :

A : 228 million

B : 289 million

C : 531 million

D : 325 million

Answer: A

Question 3

TU has relatively few tangible assets and is dependent for profits and growth on the high-value individuals it employs. Which of the following statements best explains why the net asset valuator method’s considered unstable for TU?

Options :

A : TU does not account for its tangible assets

B : TU does not account for its intangible assets.

C : TU accounts for its intangible assets at net realisable value.

D : TU accounts for its intangible assets at historical value.

Answer: B

Question 4

The Board of Directors of Company T is considering a rights issue to fund a new investment opportunity

which has a zero NPV.

The Board of Directors wishes to explain to shareholders what the theoretical impact on their wealth will be as

a result of different possible actions during the rights issue.

Which THREE of the following statements in respect of theoretical shareholder wealth are true?

Options :

A : If shareholders exercise their full rights there will be no impact on their wealth.

B : If the shareholders allow their rights to lapse (do nothing) there will be no impact on their wealth.

C : If shareholders sell their entire rights entitlement there will be no impact on their wealth.

D : If the shareholders only partially exercise their rights and allow the remainder to lapse there will be no impact on their wealth

E : If shareholders partially exercise their rights and sell the remaining rights entitlement there will be no impact on their wealth.

Answer: A,C

Question 5

Company Z has just completed the all-cash acquisition of Company A.

Both companies operate in the advertising industry.

The market considered the acquisition a positive strategic move by Company Z.

Which THREE of the following will the shareholders of Company Z expect the company's directors to

prioritise following the acquisition?

Options :

A : The realisation of anticipated post-acquisition synergies.

B : The development of a dividend policy to meet the expectations of the target company shareholders.

C : The integration and retention of key employees.

D : The regulatory approval required to complete the acquisition.

E : The retention of key customers of the acquired company.

Answer: A,C

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