SECTION A
Question 1
The telecommunications sector comprises of companies that make communication
possible on a global scale whether through the phone or Internet. The £37-billion
communications sector is already the UK economy's second largest, after financial
service, and the UK is home to an array of household names with global operations.
There is a separate Excel file with the financials and ratios given for two major
telecommunications companies that are listed on the London Stock Exchange.
You are required to:
(a)
Select and evaluate at least 10 financial ratios
(Don’t calculate, use
information in the Excel file)
and
calculate
2 non-financial ratios to analyse
the financial position and performance of the two companies. You are
expected to use charts to compare performance of the two companies using
the last three years (2021,2022 & 2023) financial and non-financial data. You
will need to look at the audited financial statements and carry out further
research to explain the performance of the company over the three years.
(28 Marks)
(b)
Based on the analysis conducted in part (a) make recommendations as to
how the companies could improve performance in the future. Try to make the
recommendations as specific as possible. In other words, try to avoid general
statements such as ‘improve profit by 10%’. How can profit be improved. Use
the published financials and director’s comments to assist you in these
recommendations.
Question 2
You are required to conduct research and identify two scholarly articles (one article
for each selected technology) on current technological developments (i.e. Big Data,
Blockchain) and critically evaluate how those developments are impacting on the
finance and accounting industry in the UK.
SECTION B
Question 1
R Howard, Engineers are considering an investment programme. It has a choice of
three projects each of which cost £90,000, but capital is limited in supply to £90,000.
The firm’s existing return on capital is 15% and, in this case, this is assumed to be
their cost of capital for appraisal purposes.
Project A Project B Project C
Hydraulic Ramps
Workshop
Modification to metal
cutting machine
Special Delivery vehicle
Year £ £
(90,000)
22,000
26,000
27,000
29,000
35,000
£
0
(90,000) (90,000)
1
17,000 28,000
2
29,000 26,000
3
38,000 36,000
4
28,000 28,000
5
29,000 28,000
You are required to:
a)
Calculate the PBP, NPV and IRR for each project
(12 marks)
b) Recommend with reasons, which project you would undertake (if either)
Question 2
Engineering R Us Ltd is considering three possible investment projects, X, Y and Z.
The expected pattern of cash flows for each project is as follows:
Initial Outlay (£900) (£1000) (£1100)
Year 1 £550 £500 £450
Year 2 £200 £350 £400
Year 3 £300 £370 £550
Year 4 £400 £500 £670
The business has a cost of capital of 11 per cent and the investment budget for the
year has just been restricted to £1,2 million. This means it is possible to undertake
one project only.
Required
Using the Profitability Index method which investment project should the business
undertake?
(10 Mar