ACN3084-2009-6-E-1 - UNIVERSITY EXAMINATIONS as U N I...

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Unformatted text preview: UNIVERSITY EXAMINATIONS UNIVERSITEITSEKSAMENS as: U N I SA :gmwafnca ACN3084 May/June 2009 ACN3186 RAC318$ FINANCIAL ANALYSIS, VALUATIONS AND RESTRUCTURING (ACCOUNTING 308) Duration 2 Hours 100 Marks EXAMINERS FIRST MR WD JONKER MRS C NEL SECOND PROF BL STEYN EXTERNAL PROF G VAN N VILJOEN Use of a non-programmable pocket calculator is permi55ible This paper con5ists of 8 pages, as well as tables A and B PLEASE NOTE’ 1 This paper consrsts of FOUR (4) questions, as well as the followmg tables (i) Table A - Present value of R1 after it years (ii) Table 8 — Present value of R1 per annum for n years All questions must be answered BaSIC workings, where applicable, must be shown Ensure that you are handed the correct examination script (blue) by the inVigilator EACH QUESTION ATTEMPTED MUST BE COMMENCED ON A SEPARATE PAGE A combined final mark of 50% is reqUIred to pass this module The final mark is calculated as follows (10% of mark obtained in compulsory asagnment) + (90% of mark obtained in this examination) The year-mark Will only be taken into account if a subminimum of 40% is obtained for this examination CDU‘I-D-(JOM PROPOSED TIMETABLE 35 [TURN OVER] QUESTION 1 (29 marks, 35 minutes) PANDA LIMITED CONSOLIDATED BALANCE SHEET AT 28 FEBRUARY 2009 ASSETS Non-current assets Fixed property at valuation Other fixed assets at carrying amount GoodWIll, patents and trademarks Other finanCIal assets — Trade Investments - Long-term loans — Listed Investments - Unllsted Investments - Investment 1n unconsolidated SUbSldlary at cost prrce Current assets Cash and cash equavalents Trade and other receivables Inventories Total assets EQUITY AND LIABILITtES Capital and reserves Issued share capital (500 000 ordrnary shares of R50 each) Share premium Non—distributable reserve (revaluation of fixed property) Distributable reserves - Accumulated profit Equ1ty 12% Preference share capital (500 000 shares of R20 each) Minority Interest Non-current liabllrtles Interest beanng debt - Debentures — Long-term loans Deferred taxation Capital and reserves and non-current liabilities earned forward (PTO) ACN3084/ACN3186 May/June 2009 2009 R’OOO 350 000 180 000 100 000 30 000 40 000 170 000 520 000 169 000 25 000 5 000 23 000 102 000 155 000 10 000 4 000 63 000 232 000 [TURN OVER] 3 ACN3084/ACN3186 May/June 2009 QUESTION 1 (continued) PANDA LIMITED CONSOLIDATED BALANCE SHEET AT 28 FEBRUARY 2009 2009 R’OOO Capital and reserves and non-current liabilities brought forward 232 000 Current liabilities 288 000 Dividends payable 3 700 Trade and other payables 75 300 Bank 120 000 Short—term borrowmgs 85 000 Current portion of long-term loans 4 000 Total equity and liabilities 520 000 PANDA LIMITED CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2009 Turnover 541 840 Gross profit 162 492 Operating costs 41 160 Operating profit 121 332 Investment income - Interest received on trade investments and long-term loans 1 624 - Listed investments 156 - Unlisted investments 920 - Unconsolidated subSidiaries 900 Profit from operations 124 932 Finance cost 42 650 Profit before taxation 82 282 Taxation 30 324 Profit after taxation 51 958 Minority share in profit 800 Net profit from ordinary activmes 51 158 Unusual item 5 000 Net profit for the year 56 158 Additional information. The followmg dIVIdendS were declared on 28 February 2009 - Preference diVidend 12% - Ordinary dIVIdend R5 per share These diVidends have already been provaded for in the books of Panda Limited REQUIRED (a) Calculate the profitability ratios, With the exception of finanCIai leverage ratios, for Panda Limited for the 2009 finanCiaI year (26) (b) Briefly comment on the profitability of other financii’aiI assets in comparison to the cost of finance (3) [29] [TURN OVER] 4 ACN3084/ACN3186 May/June 2009 QUESTION 2 (25 marks, 30 minutes) The followrng Information 18 available for Calco lelted, a motor spares manufacturer listed on the Johannesburg Stock Exchange, for the year ended 28 February 2009 2007 2008 2009 R R R Net profit before tax 354 857 391 000 430 000 Included m net profit before tax are the followrng expenses insurance loss - 50 000 - Excessrve salaries 10 000 10 000 10 000 On further rnvestrgatron you ascertained the followrng from the frnancral drrector of Calco Ltd and your own research The risk free rate of return 16% The market rrsk premium for the motor Industry 11% The company tax rate 30% The faxed davrdend pay—out ratro of Calco Ltd 40% The beta coeffrcrent for Calco Ltd 0,9 Issued ordrnary shares of R1 each 1 mIIIIon shares 10 % preference shares of R10 each 10 000 shares REQUIRED (a) Calculate the revrsed earnings of Calco Ltd Wthh you would use for valuation purposes on 28 February 2009, and recalculate the price earnings ratlo, accepting a current market prrce of 57 cents per share (14) Round off all calculations to the nearest Integer (b) Calculate the fair rate of return to be used for the valuation of a mrnorlty share holding In Calco Ltd by usrng the capital asset pncrng model (5) (c) Ignoring the current market price of 57 cents per share as mentioned In (a) above, determine the value of a 5% shareholding In Calco Ltd Accept a farr rate of return of 26% and that Calco Ltd wrll maintain Its current market share and perpetual growth m future earnings as follows 2010 2011 2012 R R R Future sustainable earnings 222 200 244 420 268 862 (6) [25] [TURN OVER] 5 ACN3084/ACN3186 May/June 2009 QUESTION 3 (22 marks, 26 mInutes) At 28 February 2009 the abndged balance sheets of TItus Ltd and Cassal Ltd were as follows Titus Cassal Ltd Ltd R R ASSETS Non-current assets 154 550 11 220 Investments - LIsted shares 2 000 9 300 - UnIIsted shares (4 000 shares In Cassal Ltd) 32 000 - — UnIIsted shares (2 000 shares In TItus Ltd) — 14 300 - Cash 100 000 - Current assets 1 000 1 000 289 550 W EQUITY AND LIABILITIES OrdInary shares of R2 each 80 000 40 000 10% Redeemable preference shares of R1 each 100 000 - Accumulated profIt (loss) 64 000 (7 400) Current IIabIlItIes 45 550 3 220 289 550 35 820 AddItIonal InformatIon 1 The fInanCIal assets of TItus Ltd and Cassal Ltd conSIst of IIsted Investments WIth a market value of R20 000 and R1 1 000 respectIvely Because of the excellent pOSItIonIng of TItus Ltd's fIxed property It was deCIded to Increase the value ofthe property by R64 000 These adjustments must stIIl be made In the records 2 At 1 March 2009 Titus Ltd and Cassal Ltd amalgamated and a new company, Gama Ltd, was Incorporated for thIs purpose 3 Gama Ltd took over all the assets and IrabIlItIes, WIth the exceptIon of Inter—company :nvestments. of both TItus Ltd and Cassal Ltd at revalued values The cash should be used to redeem the 10% redeemable preference shares 4 The purchase game was settled by the Issurng of 200 000 R1 ordInary shares In Game Ltd REQUIRED (a) DetermIne the purchase prIce paId to the shareholders of TItus Ltd and Cassal Ltd (Inter— company Investments excludlng) (4) (b) Calculate the allocatIon of R1 ordInary shares In Gama Ltd to the shareholders of TItus Ltd and Cassal Ltd (13) (0) Calculate the share prequm (2) (d) Prepare the balance sheet of Gama Ltd after the amalgamatIon has taken place [33) [TURN OVER] 6 ACN3084I’ACN3186 MayiJune 2009 QUESTION 4 (24 marks; 29 mInutes) The questIon conSIsts of eIg ht multIple choace questIons, each ofthch must be conSIdered Independently Each questIon has only one correct answer and must be answered In the followmg manner Example ALLLA-b-D-L (DNGU'IJfiwN—l mmqmoaom THE FOLLOWING INFORMATION MUST BE USED FOR PURPOSES OF ANSWERING ALL QUESTIONS. Adlem & Casey deCIded to convert theIr partnershrp Into a prIvate company, ABC (Pty) LImIted On 1 March 2009, the date of converSIon, the prOVISIonal abrIdged balance sheet of the partnershIp was as follows ASSETS R Non-current assets 180 000 Current assets 170 000 Total assets 350 000 CAPITAL AND LIABILITIES CapItal accounts 200 000 -Adlem - Casey 137 500 Non-current lIabIIItIes 150 000 Total capItal and lIabIIitIes 350 000 AddItIonal InformatIOn 1 Interest of 16% per annum Is payable on the partners’ capItal accounts No Interest has yet been paId or prOVIded for WIth regard to the past fInanCIal year and the matter must be rectIerd 2 Profit and losses are shared by Adlem and Casey In the who of 5 3 respectIvely 3 Annual salarIes amount to Adlem R50 000 Casey R30 000 4 The non-current lIabIlItIes conSIst of a 15% long—term loan from Adlem’s wrfe ThIs loan WIll be taken over by ABC (Pty) LImIted 5 On 1 March 2009, the dIrectors of ABC (Pty) Ltd Issued 1 000 15% redeemable preference shares of R100 each, redeemable on 28 February 2013, at par value Twelve percent (12%) Is conSIdered a far rate of return on SImIIar preference shares [TURN OVER] 7 ACN3084/ACN3186 May/June 2009 QUESTION 4 (continued) REQUIRED 4 1 Indtcate Wthh of the followmg combination offlgures represents the maXImum capital In the profit shanng ('8th Total Adlem Casey R R R (a) 200 000 52 500 147 500 (b) 104 000 65 000 39 000 (c) 200 000 62 500 137 500 (d) 232 000 72 500 159 500 (e) none of the above (3) 4 2 Identify the combination of figures Wthh represents the prewous claims of the partners against the Income of the partnership Total Adlem Casey R R R 112 000 60 000 52 000 32 000 10 000 22 000 a) ) ) 80 000 50000 30000 ) ) 00' 116 500 64 500 52 000 none of the above (3) CDO. ( ( ( ( ( 4 3 Determine the value of the redeemable preference shares at 1 March 2009 (a) R100 025 (b) R109 155 (0) R125 000 (01) R100 000 (e) none of the above (3) 4 4 Determine the value of the same preference shares If they were not redeemable (a) R100 025 (b) R109 155 (0) R125 000 (d) R100 000 (e) none of the above (3) 4 5 Determlne the value of the redeemable preference shares at 1 March 2009 If the fair rate of return on Similar preference shares was 15% (a) R100 025 (b) R109 155 (0) R125 000 (d) R100 000 (e) none of the above (3) [TURN OVER] 8 ACN3084/ACN3186 May/June 2009 QUESTION 4 (continued) 46 47 48 Determine the critical break—even turnover based on a gross pFOfIt percentage of40°/o on turnover, as well as expenses to the amount of R420 000, Wthh Include Interest (expense) of R50 000 (a) (b) (C) (d) (e) R 825 000 R 925 000 R1 050 000 Information InsuffICIent to do the calculation none of the above (3) Determlne the interest coverage if a turnover of R1,4 million IS achieved, assuming a gross profit percentage of 40% on turnover, as well as expenses to the amount of R420 000, Wthh Includes Interest (expense) of R50 000 ( ( ( ( ( CD CLO Um VVVVV 4,8 times 3,8 times 2,8 times Information InsuffICIent to do the calculation none of the above (3) Determine the leverage effect of Adlem & Casey Partnership to the nearest full percentage If the partnership’s profit before tax amounted to R7? 000, after taking finance cost of R35 000 rnto account (a) (b) (C) (d) (e) -5% 19% 49% 5% none of the above (3) [24] © UNISA 2009 wood :05 590 m8 a mood Rod mood was wood bad mood mmod wood $0.0 mood wood wood EQo Sod 80d mood mmod Sod z: o 30.0 m: fio m5 0 0.2.0 80.0 $3 33 $3 mmod 23 35.0 mom 0 Bo o mmmd m8 0 $3 $06 EN 0 BS Nmmd Ed End 33 wow 0 9N0 N93 $3 and 53 “mm 0 0:8 ago «Ed 93 ovmd 33 com o mmwd «25.. 2 <2 5. 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