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GCE JAN 2011 : (A2 7) Finance

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Centre Number 71 Candidate Number ADVANCED General Certificate of Education January 2011 GCE Applied Business assessing Finance A6B11 Assessment Unit A2 7 [A6B11] THURSDAY 20 JANUARY, AFTERNOON TIME 1 hour 30 minutes. INSTRUCTIONS TO CANDIDATES Write your Centre Number and Candidate Number in the spaces provided at the top of this page. Write your answers in the spaces provided in this question paper. Answer all three questions. INFORMATION FOR CANDIDATES The total mark for this paper is 80. Quality of written communication will be assessed in questions 1(d), 2(d) and 3(b). Figures in brackets printed down the right-hand side of pages indicate the marks awarded to each question or part question. For Examiner s use only Question Number 111511 ADVICE FOR CANDIDATES 1 You are advised to take account of the marks for each part question in allocating the available examination time. If you do not have sufficient space to complete your answers, you may use the additional page at the back of the paper. 2 6042 3 Total Marks Marks BLANK PAGE 6042 2 [Turn over Study the information below and answer the questions that follow. Examiner Only Marks 1 Remark Assume that the government is considering the introduction of an automated toll charging system for all vehicles using the country s motorway network. It is proposed to levy a toll charge of 1.00 per vehicle, per journey. The fixed costs (e.g. road cleansing) of maintaining the motorway network are estimated to be 42,000 per day, whilst the variable costs of operating the motorway network (e.g. street lighting) are estimated to be 0.60 per vehicle. It is estimated that 160,000 vehicles currently use the motorway network per day. (a) You are required to: (i) calculate the breakeven point (in terms of the number of vehicles using the motorway network): __________________________________________________ [2] You should use this space for your calculations: (ii) calculate the breakeven point (in terms of the revenue received from toll charges): __________________________________________________ [2] You should use this space for your calculations: 6042 3 [Turn over (iii) calculate the total profit that could accrue to the government if the above proposals proceed as planned: Examiner Only Marks Remark __________________________________________________ [3] You should use this space for your calculations: (b) Draw a breakeven graph showing clearly the following information: (i) Total Revenue Line [1] (ii) Total Costs Line [1] (iii) Breakeven Point (in terms of number of vehicles and toll charges levied) [2] (iv) Total Profit (on the basis that 160,000 vehicles use the motorway network) [1] (v) Margin of Safety in terms of number of vehicles and toll charges levied (on the basis that 160,000 vehicles use the motorway network) [2] 6042 4 [Turn over Breakeven Graph Motorway Network 6042 5 [Turn over (c) You are required to: Examiner Only Marks Remark (i) Re-calculate the breakeven point (in terms of the number of vehicles using the motorway network) if the toll charge levied was raised to 2 per vehicle per journey: __________________________________________________ [2] You should use this space for your calculations: (ii) Re-calculate the breakeven point (in terms of the revenue received from toll charges) if the toll charge levied was raised to 2 per vehicle per journey: __________________________________________________ [2] You should use this space for your calculations: (d) Evaluate three ways in which breakeven analysis would facilitate the efficient management of the motorway network. _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ 6042 6 [Turn over Examiner Only _________________________________________________________ Marks Remark _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ ______________________________________________________ [12] 6042 7 [Turn over Study the information below and answer the questions that follow. Examiner Only Marks 2 Remark The National Trust recently announced plans to rebuild the Giant s Causeway Visitor Centre. Assume that the management team plans to make payments to the building contractor at various stages throughout the project. Such payments amount to 10m and 8m, payable at the end of 2011 and 2012 respectively. It is estimated that revenues received from visitors would amount to 9.6m and 12.6m during 2013 and 2014 respectively. When drawing up their initial plans, it is possible that the management team at The National Trust would have evaluated this project using investment appraisal techniques such as Payback and Net Present Value. (a) Using the relevant information, calculate the payback period for this project: Annual Net Cashflow ( ) 2011 Cumulative Net Cashflow ( ) 10,000,000 2012 2013 2014 Payback period is: ______________________ [8] You should use this space for your calculations: 6042 8 [Turn over (b) Using the appropriate information, calculate the net present value (NPV) of this project (to the nearest ): Year Annual Net Cashflow ( ) Discount Factor (10%) 2011 10,000,000 Examiner Only Marks Remark 1.0000 2012 0.9091 2013 0.8264 2014 Present Value ( ) 0.7513 Net Present Value [8] You should use this space for your calculations: (c) Using the information in part (a) or (b), explain whether or not the project should proceed. _________________________________________________________ _________________________________________________________ _________________________________________________________ ______________________________________________________ [2] 6042 9 [Turn over (d) Evaluate the usefulness of Net Present Value (NPV) as a method of investment appraisal, to an organisation such as The National Trust. Examiner Only Marks Remark _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ ______________________________________________________ [12] 6042 10 [Turn over Study the information below and answer the questions that follow. Examiner Only Marks 3 Remark (a) Explain the ways in which each of the following organisations can act as a source of finance for businesses in Northern Ireland: (i) Prince s Trust: _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ __________________________________________________ [4] (ii) Venture Capitalist: _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ __________________________________________________ [4] 6042 11 [Turn over (b) A public limited company is typically funded from share capital. Discuss the advantages and disadvantages of raising funds in this way. Examiner Only Marks Remark _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ ______________________________________________________ [12] 6042 12 [Turn over (Extra page if needed) Examiner Only Marks Remark ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ 6042 13 [Turn over THIS IS THE END OF THE QUESTION PAPER Permission to reproduce all copyright material has been applied for. In some cases, efforts to contact copyright holders may have been unsuccessful and CCEA will be happy to rectify any omissions of acknowledgement in future if notified. 111511 6042 16 [Turn over

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Additional Info : Gce Applied Business January 2011 Assessment Unit A2 7 - Finance
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