1、2018 年 ACCA 考试 P4 高级财务管理真题及答案解析(总分：125.00，做题时间：195 分钟)案例分析题(总题数：4，分数：125.00)Section A This question is compulsory and MUST be attemptedChikepe Co is a large listed company operating in the pharmaceutical industry with a current market value of equity of $12,600 million and a debt to equity ratio of
2、30:70, in market value terms. Institutional investors hold most of its equity shares. The company develops and manufactures antibiotics and anti-viral medicines. Both the company and its products have an established positive reputation among the medical profession, and its products are used widely.
3、However, its rate of innovation has slowed considerably in the last few years and it has fewer new medical products coming into the market.At a recent meeting of the board of directors (BoD), it was decided that the company needed to change its current strategy of growing organically to one of acqui
4、ring companies, in order to maintain the growth in its share price in the future. The members of the BoD had different opinions on the type of acquisition strategy to pursue.Director A was of the opinion that Chikepe Co should follow a strategy of acquiring companies in different business sectors. S
5、he suggested that focusing on just the pharmaceutical sector was too risky and acquiring companies in different business sectors will reduce this risk.Director B was of the opinion that Director As suggestion would not result in a reduction in risk for shareholders. In fact, he suggested that this w
6、ould result in agency related issues with Chikepe Cos shareholders reacting negatively and as a result, the companys share price would fall. Instead, Director B suggested that Chikepe Co should focus on its current business and acquire other established pharmaceutical companies. In this way, the com
7、pany will gain synergy benefits and thereby increase value for its shareholders.Director C agreed with Director B, but suggested that Chikepe Co should consider relatively new pharmaceutical companies, as well as established businesses. In her opinion, newer companies might be involved in research a
8、nd development of innovative products, which could have high potential in the future. She suggested that using real options methodology with traditional investment appraisal methods such as net present value could help establish a more accurate estimate of the potential value of such companies.The c
9、ompany has asked its finance team to prepare a report on the value of a potential target company, Foshoro Co, before making a final decision.Foshoro CoFoshoro Co is a non-listed pharmaceutical company established about 10 years ago. Initially Foshoro Co grew rapidly, but this rate of growth slowed c
10、onsiderably three years ago, after a venture capital equity backer exited the company by selling its stake back to the founding directors. The directors had to raise substantial debt capital to buy back the equity stake. The companys current debt to equity ratio is 60:40. This high level of gearing
11、means that the company will find it difficult to obtain funds to develop its innovative products in the future.The following financial information relates to Foshoro Co:Extract from the most recent statement of profit or lossIn arriving at the profit before interest and tax, Foshoro Co deducted tax
12、allowable depreciation and other non-cash expenses totalling $1120 million. It requires a cash investment of $982 million in non-current assets and working capital to continue its operations at the current level.Three years ago, Foshoro Cos profit after tax was $833 million and this has been growing
13、 steadily to their current level. Foshoro Cos profit before interest and tax and its cash flows grew at the same growth rate as well. It is likely that this growth rate will continue for the foreseeable future if Foshoro Co is not acquired by Chikepe Co. Foshoro Cos cost of capital has been estimate
14、d at 10%.Combined company: Chikepe Co and Foshoro CoOnce Chikepe Co acquires Foshoro Co, it is predicted that the combined companys sales revenue will be $4,200 million in the first year, and its operating profit margin on sales revenue will be 20% for the foreseeable future.After the first year, th
15、e sales revenue is expected to grow at 7% per year for the following three years. It is anticipated that after the first four years, the growth rate of the combined companys free cash flows will be 56% per year.The combined companys tax allowable depreciation is expected to be equivalent to the amou
16、nt of investment needed to maintain the current level of operations. However, as the companys sales revenue increases over the four-year period, the combined company will require an additional investment in assets of $200 million in the first year and then $064 per $1 increase in sales revenue for t
17、he next three years.It can be assumed that the asset beta of the combined company is the weighted average of the individual companies asset betas, weighted in proportion of the individual companies value of equity. It can also be assumed that the capital structure of the combined company remains at
18、Chikepe Cos current capital structure level, a debt to equity ratio of 30:70. Chikepe Co pays interest on borrowings at a rate of 53% per annum.Chikepe Co estimates that it will be able to acquire Foshoro Co by paying a premium of 30% above its estimated equity value to Foshoro Cos shareholders.Othe
19、r financial informationThe current annual government borrowing base rate is 2% and the annual market risk premium is estimated at 7%.Both companies pay tax at an annual rate of 20%.Chikepe Co estimates equity values in acquisitions using the free cash flow to firm method.Future acquisitionsThe BoD a
20、greed that in the future it is likely that Chikepe Co will target both listed and non-listed companies for acquisition. It is aware that when pursuing acquisitions of listed companies, the company would need to ensure that it complied with regulations such as the mandatory bid rule and the principle
21、 of equal treatment to protect shareholders. The BoD is also aware that some listed companies may attempt to defend acquisitions by employing anti-takeover measures such as poison pills and disposal of crown jewels.Required:（分数：50）(1).Compare and contrast the reasons for the opinions held by Directo
22、r A and by Director B, and discuss the types of synergy benefits which may arise from the acquisition strategy suggested by Director B.（分数：9）_(2).Discuss how using real options methodology in conjunction with net present value could help establish a more accurate estimate of the potential value of c
23、ompanies, as suggested by Director C.（分数：5）_(3).Prepare a report for the board of directors of Chikepe Co which:(i) Estimates the current equity value of Foshoro Co; (6 marks)(ii) Estimates the equity value arising from combining Foshoro Co with Chikepe Co; (11 marks)(iii) Evaluates whether the acqu
24、isition of Foshoro Co would be beneficial to Chikepe Cos shareholders and discusses the limitations of the valuation method used in (c)(i) and (c)(ii) above. (7 marks)Professional marks will be awarded in part (c) for the format, structure and presentation of the report. (4 marks)（分数：28）_(4).Discuss
25、 how the mandatory bid rule and the principle of equal treatment protects shareholders in the event of their company facing a takeover bid, and discuss the effectiveness of poison pills and disposal of crown jewels as defensive tactics against hostile takeover bids.（分数：8）_Section B TWO questions ONL
26、Y to be attemptedTippletine Co is based in Valliland. It is listed on Vallilands stock exchange but only has a small number of shareholders. Its directors collectively own 45% of the equity share capital.Tippletine Cos growth has been based on the manufacture of household electrical goods. However,
27、the directors have taken a strategic decision to diversify operations and to make a major investment in facilities for the manufacture of office equipment.Details of investmentThe new investment is being appraised over a four-year time horizon. Revenues from the new investment are uncertain and Tipp
28、letine Cos finance director has prepared what she regards as cautious forecasts. She predicts that it will generate $2 million operating cash flows before marketing costs in Year 1 and $145 million operating cash flows before marketing costs in Year 2, with operating cash flows rising by the expecte
29、d levels of inflation in Years 3 and 4.Marketing costs are predicted to be $9 million in Year 1 and $2 million in each of Years 2 to 4.The new investment will require immediate expenditure on facilities of $306 million. Tax allowable depreciation will be available on the new investment at an annual
30、rate of 25% reducing balance basis. It can be assumed that there will either be a balancing allowance or charge in the final year of the appraisal. The finance director believes the facilities will remain viable after four years, and therefore a realisable value of $135 million can be assumed at the
31、 end of the appraisal period.The new facilities will also require an immediate initial investment in working capital of $3 million. Working capital requirements will increase by the rate of inflation for the next three years and any working capital at the start of Year 4 will be assumed to be releas
32、ed at the end of the appraisal period.Tippletine Co pays tax at an annual rate of 30%. Tax is payable with a years time delay. Any tax losses on the investment can be assumed to be carried forward and written off against future profits from the investment.Predicted inflation rates are as follows:Fin
33、ancing the investmentTippletine Co has been considering two choices for financing all of the $306 million needed for the initial investment in the facilities: A subsidised loan from a government loan scheme, with the loan repayable at the end of the four years. Issue costs of 4% of the gross finance
34、 would be payable. Interest would be payable at a rate of 30 basis points below the risk free rate of 25%. In order to obtain the benefits of the loan scheme, Tippletine Co would have to fulfil various conditions, including locating the facilities in a remote part of Valliland where unemployment is
35、high. Convertible loan notes, with the subscribers for the notes including some of Tippletine Cos directors. The loan notes would have issue costs of 4% of the gross finance. If not converted, the loan notes would be redeemed in six years time. Interest would be payable at 5%, which is Tippletine Co
36、s normal cost of borrowing. Conversion would take place at an effective price of $275 per share. However, the loan note holders could enforce redemption at any time from the start of Year 3 if Tippletine Cos share price fell below $150 per share. Tippletine Cos current share price is $220 per share.
37、Issue costs for the subsidised loan and convertible loan notes would be paid out of available cash reserves. Issue costs are not allowable as a tax-deductible expense.In initial discussions, the majority of the board favoured using the subsidised loan. The appraisal of the investment should be prepa
38、red on the basis that this method of finance will be used. However, the chairman argued strongly in favour of the convertible loan notes, as, in his view, operating costs will be lower if Tippletine Co does not have to fulfil the conditions laid down by the government of Valliland. Tippletine Cos fi
39、nance director is sceptical, however, about whether the other shareholders would approve the issue of convertible loan notes on the terms suggested. The directors will decide which method of finance to use at the next board meeting.Other informationHumabuz Co is a large manufacturer of office equipm
40、ent in Valliland. Humabuz Cos geared cost of equity is estimated to be 105% and its pre-tax cost of debt to be 54%. These estimates are based on a capital structure comprising $225 million 6% irredeemable bonds, trading at $107 per $100, and 125 million $1 equity shares, trading at $320 per share. H
41、umabuz Co also pays tax at an annual rate of 30% on its taxable profits.Required:（分数：25）(1).Calculate the adjusted present value for the investment on the basis that it is financed by the subsidised loan and conclude whether the project should be accepted or not. Show all relevant calculations.（分数：1
42、7）_(2).Discuss the issues which Tippletine Cos shareholders who are not directors would consider if its directors decided that the new investment should be financed by the issue of convertible loan notes on the terms suggested.Note: You are not required to carry out any calculations when answering p
43、art (b).（分数：8）_Arthuro Co groupArthuro Co is based in Hittyland and is listed on Hittylands stock exchange. Arthuro Co has one wholly-owned subsidiary, Bowerscots Co, based in the neighbouring country of Owlia. Hittyland and Owlia are in a currency union and the currency of both countries is the $.A
44、rthuro Co purchased 100% of Bowerscots Cos share capital three years ago. Arthuro Co has the power under the acquisition to determine the level of dividend paid by Bowerscots Co. However, Arthuro Cos board decided to let Bowerscots Cos management team have some discretion when making investment deci
45、sions. Arthuro Cos board decided that it should receive dividends of 60% of Bowerscots Cos post-tax profits and has allowed Bowerscots Co to use its remaining retained earnings to fund investments chosen by its management. A bonus linked to Bowerscots Cos after-tax profits is a significant element o
46、f Bowerscots Cos managers remuneration.Bowerscots Co operates in a very competitive environment. Recently, a senior member of its management team has left to join a competitor.Arthuro Cos dividend policyUntil three months ago, Arthuro Co had 90 million $2 equity shares in issue and $135 million 8% b
47、onds. Three months ago it made a 1 for 3 rights issue. A number of shareholders did not take up their rights, but sold them on, so there have been changes in its shareholder base. Some shareholders expressed concern about dilution of their dividend income as a result of the rights issue. Therefore,
48、Arthuro Cos board felt it had to promise, for the foreseeable future, at least to maintain the dividend of $074 per equity share, which it paid for the two years before the rights issue.Arthuro Cos board is nevertheless concerned about whether it will have sufficient funds available to fulfil its prom
