Page 271 - Microsoft Word - 00 CIMA F1 Prelims STUDENT 2018.docx

Exam style questions and answers

She has told the letting agent she will think about it for one week in the hope
that some student tenants come forward.

Which ONE of the following would best describes the Christine’s
thoughts?

A An abandonment option

B A follow-on option

C A ‘wait-and-see’ option (timing option)

D A financial option

36 Hey plc is appraising a new capital project using the Adjusted Present Value
method. The finance director has collated the following information regarding
the project:

Initial cash outflow £250 million

Annual cash inflow into perpetuity £50 million

Cost of equity = 15%

Financing package:

10 year loan with interest payable at 6% £100 million

Tax rate = 35%

Which ONE of the following is the closest Adjusted Present Value for the
project? (To the rounded million.)

A £99 Million

B £83 Million

C £70 Million

D £13 Million

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