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Appendix 2

37 814,030

Year Cash flow Certainty RF DF 6% PV
equivalent
0 (2,000,000) 1 1.000 (2,000,000)

1 1,800,000 0.95 0.943 1,612,530
2 1,500,000 0.90 0.890 1,201,500
NPV = 814,030

38 B, C

The strike is a specific risk to Big Co and is therefore an unsystematic risk.

39 C

Ke = Rf + (Rm – Rf) Beta

13% = 6% + (10% - 6%) x Beta

Beta = 1.75

40 D

An increase in visitor turnover implies either there were more mental health
cases for BRAIN to deal with, or they were to deal with them more quickly,
neither of which is good for a mental health charity.

41 A, B, C

D would be inappropriate as they are specialists in this area, they just need
better supervision.

E The bonus payment appears to be part of the problem, increasing would not
resolve the issues.

F If they removed the bonus completely they may struggle to keep/attract
people with the necessary skills.

42 B

The value from the normal tables for 95% is 1.645.

The value at risk = Std Dev × Z stat

1.645 × 6 = 9.87

280