DEMO VERSION OF THE SECOND ROUND TASKS

Business and Management

Sample test

Part 1. Tests. 40 points. Multiple choice (N:5).

Choose all the appropriate answers.

The choice of all the correct answers to the question is 10 points.

If not all correct answers are given, the question is scored 5 points.
Selecting a wrong answer is 0 points.

Over the past 20 years, company W has been producing model Z washing machine, which has
been popular in the local market in the class of compact washing machines. Model Z has a
relatively large market share with a rather weak competition. Technologically, model Z is already
outdated, so it would be advisable to invest in its upgrading. Sales of model Z have been stable
for the last 5 years. There was no growth nor decline in demand. In addition to model Z, the
company produces about 15 modern models belonging to other classes of washing machines.
Which of the following solutions would you suggest to the product management of company W
regarding model Z to capitalize on the popularity of this model?

A. To quickly withdraw model Z from the market and use the funds for the development of a
new, more up-to-date model;
B. To invest in the technological upgrading of model Z;
C. Reduce the price of model Z and dramatically increase sales as a result;
D. Do not advertise model Z, but start actively promoting other products;
E. Gradually withdraw model Z from the market and focus all efforts on promoting other
models of washing machines.

Key: B, D

2. An architectural bureau employs about 20 people, who design low-rise buildings for individual
clients. Each order is carried out by a working group, which includes an architect, a designer
and a customer service specialist. Sometimes the designer is forced to work on several orders
at once. What organization structure is best suited for such a company?
A. Project structure
B. Functional structure
C. Matrix structure
D. Product structure
E. None of the listed

Key: A, C

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3. During a discussion on how to expand the assortment, the director of a cosmetic company
asked the HR manager to think about the use of the media and social networks for advertising
vacancies for the managers of new production lines. “Why not we look for managers among
company employees? HR manager replied. – After all, …”:
A. We do not know what competencies outsiders may have.
B. Internal recruitment will allow us to choose from more candidates.
C. We may reduce hiring costs.
D. We can increase the motivation of employees by setting an example of the
appreciated professional capabilities of their colleague.
E. We will avoid the threat of tense personal relationships.
Key: A, C, D

4. Having analyzed the financial statements of trade company N, Vladimir, an auditor, prepared
a report for the company’s management. He wrote that the company had sharply increased the
number of receivables and payables in the year he analyzed. Vladimir specifically noted that
these changes:
A. mean that the company adopted an aggressive credit policy.
B. mean that the company adopted a conservative credit policy.
C. decrease the company’s current liquidity.
D. require additional attention to the structure of receivables.
E. lead to changes in the company’s financial cycle.
Ключ: D, Е

Part 2. Tasks with short answers. 20 points.

Complete the task with an open answer.
Write down the answer as a number, numbers or a numerical expression (without dimension and
other words), or as a phrase (no more than three words).

Task 1. 10 points
Within the framework of the STP model, at the stage of ____________ marketing managers
usually determine specific characteristics of consumer demand
……………………………………………………………………………………………………..
Key: segmentation

Task 2. 10 points
An investment project brings PI of 1.2 at a discount rate of 13%.
Is the project efficient?
What are the NPV and IRR values for such a project?
Indicate their bottom line.

Solution

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The project is efficient.

NPV > 0
IRR > 13%
Answer: 0, 13.

The investment cost of the project to launch a new production line is 200 million rubles; the
revenue from the sale of new products manufactured using this line is 80 million rubles a year
(before taxes and without depreciation of the equipment). The equipment is fully amortized over
five years, after which the project is closed. The income tax rate is 30%.
Calculate the NPV and payback period of the project (simple and discounted) if the discount rate
is 12%.
Solution
NPV: 45.1 million rubles; simple payback period is 3 years; discounted payback period is 4 years
Answer: 45.1; 3; 4.

Part 3. Tasks. 40 points

Complete the task. Give a complete solution and answer

Task 1. 20 points
Company M, which sells woodworking equipment, is planning to open a new department for
repair and maintenance of this equipment. It is necessary to invest 700 000 rubles to purchase
equipment for this project (including installation and adjustment costs).
The company has 500 000 rubles as undistributed profits. This source of capital costs 10%. The
remaining part could be financed through a loan at 15%.

Additional profits which the new department is supposed to generate look as follows: the 1-st
year – 400 000 rubles, the 2-d year – 500 000 rubles, the 3-d year – 500 000 rubles. Depreciation
tax shield and loan costs are taken into account. The income tax rate is 20%.

Calculate the NPV of this project. Will it change if the project is financed completely through a
loan? What is the payback period of this project?

Solution
1. 10 points
NPV = 198 500 rubles.
Cash flows, thousands of rubles.

Year 0 1 2 3

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CF -700 400 500 500

CF after income tax -700 320 400 400
WACC 0,114
Discount 1 0,897 0,805 0,723

NPV 198,5

2. 8 points
If the project is financed only through a loan its NPV will decrease as its WACC (weighted average
cost of capital) will increase. The loan costs more than equity. (NPV will be 143 700 rubles, this
calculation is not necessary).

3. 2 points
Payback period 1,6 years

-700 -700
400 -300 1,6 = 1+300/500
500 200

Task 2. 20 points
The market capacity of a certain product is 145 million units. According to the results of marketing
research, an 8% increase in the market capacity is expected next year. As a result of the
implementation of additional marketing activities, the company "Dream" projects an increase in
its market share to 15% next year.
What additional profit can the company get next year if this year it sells 20.3 million units and
the profit per unit is 105 rubles?
Solution
Future market capacity – 145 х1,08 = 156,6 mln units.
Company’s market share – 156,6 х 0,15= 23,49 mln units.
Current year profit – 20,3 х 105 rubles = 2131,5 mln rubles.
Next year profit (a plan) – 23,49 х 105 = 2466,45 mln rubles.
Additional revenue – 334,95 mln rubles, it can be spent
Or sales increase (23,49 – 20,3 = 3,19 mln units) х 105 rubles. = 334,95 mln rubles.

Answer: 334,95 million rubles