Page 11 - CIMA May 18 - MCS Day Tasks

ADVANCED MANAGEMENT ACCOUNTING (P2) ‐ PRACTICE TASKS

TASK 3 – INVESTMENT APPRAISAL

Trigger

Extract from minutes of a recent board meeting:

Phil Whiteford (CEO): An opportunity has come to light for us to try and repeat our success from
the Northeast airport project by purchasing the Midwest Airport.

As I’m sure you know, many discount airlines use this airport as an ‘out of town’ destination for
customers who wish to travel to two of Centralia’s main cities. This means that there is significant
potential in being able to snap up the bus links between the airport and these cities.

The airport itself has seen better days, so whereas we were able to make a large gain on the sale
of Northeast airport that is unlikely here.

I’ve put together a quick analysis of some numbers. I’d like you to go away and give me your
thoughts on the project and the numbers that I’ve put together, ready for the next meeting on
Friday.

Oh, and as most of our spare cash has been earmarked for other projects, I intend to obtain the
capital for the project from our bank

Task

The Financial Controller has sent the following email to you

From: Sebastian Cohard

Date: Today

Subject: Midwest airport project

Unfortunately I haven’t got time before the next board meeting to take a good look at Paul’s
numbers, although i can see that they are very basic. Could you review them and put together a
set of talking points for the meeting that will help us produce some more robust numbers for the
project? Go through the numbers line by line and also see if there’s anything obviously missing.

Regards,

Sebastian

Prepare the work that Sebastian has requested. (Time 45 minutes)

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