Page 270 - Microsoft Word - 00 CIMA F1 Prelims STUDENT 2018.docx

Appendix 2

33 Using the beta values in the table below, which ONE industry would a risk
averse investor be most interested in investing in?

Industry Beta Value
Water utility 0.33
Tobacco 0.76
Funeral services 0.83
Advertising 1.25

A Water utility

B Tobacco

C Funeral services

D Advertising

34 The management accountant at G plc is investigating the company’s weighted
average cost of capital. She has discovered the capital structure is as follows:
Cost of Book Market
Capital value value
% £m £m
Bank loans 5 5 5
Debenture loans 8 8 8
Ordinary shares 11 18 35

Using the data above, Which ONE of the following is G plc’s weighted
average cost of capital (to the nearest whole number)?

A 5%

B 8%

C 10%

D 11%

35 Christine lets out a property to students. The current tenants are about to
leave and the property is being advertised through a letting agent to attract
new student tenants. The letting agent has advised that she advertises the
four bed property at £85 per week per person. So far there have been no
successful viewings.

The letting agent has just telephoned Christine, telling her that he has two
professionals who would like to let the property for £1,200 per month starting
immediately.

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