2008年6月、12月ACCA P4考试真题及答案

Advanced Financial
Management
Thursday 4 December 2008

Section A – BOTH questions are compulsory and MUST be attempted
1 It is now 1 December 2008. You have been hired as a financial consultant to the Blipton International Entertainment
Group which is evaluating a proposal from its hotel division to build a 400 bedroom hotel in the East End of London.
This area has developed rapidly over the last 15 years and the prospects have been further enhanced by the
announcement that London is to host the 2012 Olympics. Blipton is based in Dubai and both reports and accounts
for all its transactions in dollars. The current dollar/sterling spot rate is $1·4925/£. The operating costs for the hotel
are expected to be £30 per occupied room per day (variable) and a fixed cost of £1·7 million per annum expressed
in current prices. The proportion of bedrooms occupied, on the basis of opening for 365 days a year, is expected to
be as follows:
Year ended occupancy
31 December 2009 construction
31 December 2010 40%
31 December 2011 50%
31 December 2012 90%
31 December 2013 60%
31 December 2014 60%
UK inflation is currently projected by the Bank of England as 2·5% per annum and inflation in the United States is
4·8% per annum. These rates are expected to be constant over the term of the project. Blipton’s real cost of capital
is 4·2%. UK hotel property values within the London area are expected to rise in real terms by 8% per annum.
The construction cost for this hotel is estimated to be £6·2 million and it will be built over the 12 months to
31 December 2009. As part of the UK’s Olympic Development Plan, a 50% first year capital allowance is available
for tax purposes on building projects related to the Games. The balance of the capital expenditure can be claimed in
equal instalments over the following three years. UK profit tax is 30% and is levied and paid on profits in the year
they arise. There is no additional tax liability on remittance to or from Dubai. The company has sufficient UK profits
on its other activities to absorb the capital allowances on this project.
In making investment decisions of this type the company operates the following procedure:
1. All cash flows including construction costs are assumed to arise at the end of the year concerned and are to be
projected in nominal (money) terms over the six year period.
2. The residual value of the investment at the end of six years is assumed to be the open market value of the
property less a charge for repairs and renewals.
3. The charge for repairs and renewals is expected to be £1·2 million in current prices payable on disposal.
4. The net present value of the project should be based upon a 100% remittance of net cash flows to Dubai and
should be calculated in dollars.
5. Average room rates are set at the level required to recover variable cost plus 100%.
Required:
Prepare a report for management to include the following:
(a) A six year nominal dollar projection of the after tax cash flow for this project distinguishing between cash
flows arising from its investment phase and those arising from its return phase. (12 marks
(b) An estimate of the project’s dollar net present value and the modified internal rate of return.