BFD Past Papers Analysis Muzzammil Munaf

IQ SCHOOL OF FINANCE
CFAP 04 – BUSINESS FINANCE DECISIONS

BY MUZZAMMIL MUNAF | ACA | ADVISOR | TRAINER |
BFD PAST PAPERS ANALYSIS

ATTEMPT WISE ANALYSIS
Attempt
Segment Name Ques Part Chapter Area Description Marks
/ Year
Curum Recommend, with supporting calculations and explanations, if CM should proceed and hedge the
2022 Financial Risk Currency
BFD Metals 1 a sale of copper in six months' time. In doing so, compare a hedging strategy with the expected no 4
Summer Management Futures
Limited hedge position and state your answers in USD.
Based on the expected USD receipt on the sale of copper from part (a), explain, with calculations,
Curum Forward how CM could hedge against the fall in value of the USD using:
2022 Financial Risk
BFD Metals 1 b Futures (i) forward contract 10
Summer Management
Limited Options (ii) futures contract
(iii) options contract
Curum Forward
2022 Financial Risk Discuss your results in part (b) and recommend a hedging strategy for the expected USD receipt
BFD Metals 1 c Futures 3
Summer Management on the sale of copper.
Limited Options
Curum
2022 Financial Risk
BFD Metals 1 d Futures Explain why the outcome of a futures hedge cannot be determined with absolute certainty. 3
Summer Management
Limited
Pamir Determine a range of valuations using the valuation methods set out by Pamir's board of directors
2022 Business Business
BFD Estates 2 a and recommend, along with reasons, an issue price at which the new shares in Kurumdy will be 14
Summer Valuation Valuation
Limited offered to investors prior to it commencing to trade on the Pakistan Stock Exchange.
Pamir
2022 Business Business Discuss reasons why the shares may trade at a higher or lower price than the price suggested by
BFD Estates 2 b 3
Summer Valuation Valuation the free cash valuation in part (a).
Limited
Pamir Advise the board of directors on matters to be included in due diligence which will be expected by
2022 Business Business
BFD Estates 2 c potential investors to support the new company listing before it proceeds with the spin-off of 4
Summer Valuation Valuation
Limited Kurumdy.
P a g e 3 | 392
Always a mentor | Muzzammil Munaf
Attempt
/ Year
Centaurus Weighted Weighted
2022 Calculate the current market value of the redeemable bonds and CP's overall gearing ratio (using
BFD Pakistan 3 a average cost average cost 2
Summer market values) after phase one of its expansion strategy.
Limited of capital of capital
Centaurus
2022 Capital Asset Capital Asset Calculate CP's cost of equity using the Arbitrage Pricing Theory and Capital Asset Pricing Model
BFD Pakistan 3 b 4
Summer Pricing Model Pricing Model (CAPM), and briefly explain the difference in your answers.
Limited
2022 Calculate the current weighted average cost of capital (WACC) for CP before embarking on phase
BFD Pakistan 3 c average cost average cost 4
Summer two of the expansion strategy using the cost of equity from part (b) calculated using the CAPM.
Centaurus
2022 Capital Asset Capital Asset Calculate the expected equity beta for CP after commencement of phase two of the project and
BFD Pakistan 3 d 4
Summer Pricing Model Pricing Model calculate the revised cost of equity for CP using CAPM.
Limited
2022 Explain, with relevant calculations, how a change in CP's credit rating from AAA to A may impact
BFD Pakistan 3 e average cost average cost 3
Summer the market value of CP's corporate bonds.
2022 Recalculate the WACC for CP after embarking on phase two of the project and explain why the
BFD Pakistan 3 f average cost average cost 3
Summer WACC has changed.
2022 Infrapower Adjusted Adjusted Evaluate the proposed solar power plant investment by calculating the adjusted present value
BFD 4 a 16
Summer Limited Present Value Present Value (APV) and its modified internal rate of return (MIRR).
Adjusted Write a report to IP's board of directors which evaluates the proposed engineering project. Your
Adjusted
2022 Infrapower Present Value report should include an explanation of APV and MIRR, their respective advantages and
BFD 4 b Present Value 6
Summer Limited Investment disadvantages, and include a recommendation in your report as to whether IP should proceed with
MIRR
Appraisal a pilot for its new solar power plant design.
Determine an optimal investment strategy for the Rs. 150 million assuming:
2022 Investment Capital
BFD Go Limited 4 a (i) Partial investment in each opportunity is possible. 7
Summer Appraisal Rationing
(ii) Partial investment in each opportunity is not possible.
Asset
2022 Investment
BFD Go Limited 4 b Replacement Determine the optimal replacement cycle for the fleet of vehicles using the information provided. 5
Summer Appraisal
Decisions
Prepare a briefing note for Go's board of directors which explains the impact of introducing debt
2022 Sources of Sources of
BFD Go Limited 4 c finance into Go's capital structure and evaluates the respective costs of each proposed source of 5
Summer finance finance
finance.
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Always a mentor – Muzzammil Munaf
Attempt
/ Year
Alpha
2021 Mergers and Mergers and Calculate the current gearing of Alpha and the expected gearing level of the new combined entity,
BFD Foods 1 a 4
Winter Acquisitions Acquisitions AFFL, immediately following the proposed acquisition and evaluate the result.
Limited
Alpha
2021 Mergers and Mergers and
BFD Foods 1 b Forecast the expected after-tax WACC of AFFL immediately following acquisition. 9
Winter Acquisitions Acquisitions
Limited
Alpha Determine the expected impact on gearing and WACC immediately following the proposed sale of
2021 Mergers and Mergers and
BFD Foods 1 c the division and recommend after critically evaluating the directors’ view, if Alpha should proceed 7
Winter Acquisitions Acquisitions
Limited with the sale.
Recommend if the directors should proceed to launch the ChillMax50 production based on the
2021 Cooler Investment Net Present
BFD 2 a assumptions provided by the directors of Cooler Limited. You are advised to present your workings 18
Winter Limited Appraisal Value
in rupees in million.
2021 Cooler Investment Sensitivity Calculate the sensitivity of your analysis in part (a) to expected sales volumes and sales price and
BFD 2 b 7
Winter Limited Appraisal Analysis comment on your results.
Provide the following for FitOut for the two years ending 30 November 2022 and 2023:
Forecasting Forecasting
2021 FitOut (i)Forecasted statement of profit or loss, dividends and retained profit
MAC 3 a and and 11
Winter Limited (ii)Forecasted statement of financial position
budgeting budgeting
(iii)Forecasted statement of cash flows
Forecasting Forecasting
2021 FitOut Comment, with appropriate calculations, on whether FitOut is likely to meet its stated financial
MAC 3 b and and 4
Winter Limited objectives at the end of 30 November 2022 and 30 November 2023.
budgeting budgeting
2021 FitOut Sources of Sources of Discuss the financing options available to FitOut to manage any forecast cash deficit identified in
BFD 3 c 5
Winter Limited finance finance part (a).
Assuming that a graphical linear programming solution is to be used to maximise profit in the
2021 Clean & Linear Linear month of December:
MAC 4 a 12
Winter Co programming programming (i) State the constraints and objective function.
(ii) Determine the maximum profit that can be made in December.
2021 Clean & Linear Linear
MAC 4 b Determine resource slack assuming Clean operates at maximum profit. 3
Winter Co programming programming
2021 Clean & Linear
MAC 4 c Shadow Price Explain the concept of shadow price and calculate the shadow price of a machine hour. 4
Winter Co programming
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Attempt
/ Year
2021 Multicorp Financial Risk Interest Rate Explain the purpose and counterparty risk of entering into an interest rate swap agreement and
BFD 5 a 5
Winter Limited Management Swap also the benefits of an interest rate swap to the board of MC.
2021 Multicorp Financial Risk Interest Rate Evaluate the financial impact to both MC and CH that will result from the swap terms proposed by
BFD 5 b 7
Winter Limited Management Swap the bank.
2021 Multicorp Financial Risk Interest Rate Recommend revised interest rate swap terms which are more likely to be acceptable to the boards
BFD 5 c 4
Winter Limited Management Swap of directors of both MC and CH.
2021 Avion Decision Decision Determine which component should be made during the next month to maximise contribution
MAC 1 a 7
Summer Limited making making and determine the profit that this decision will generate.
2021 Avion Decision Decision Calculate the change in profit resulting for the proposed new pricing policy and comment on your
MAC 1 b 5
Summer Limited making making result.
Calculate the additional alloy that Avion should buy in order to deliver additional units of the
2021 Avion Decision Decision component chosen in part (a) subject to any existing machine constraints. Also, recommend the
MAC 1 c 7
Summer Limited making making maximum premium to pay as % of the current alloy cost per kg to ensure an overall profit margin
of 20% for the month is achieved.
Prepare a cashflow forecast for the year to 31 December 2021, assuming:

Craft Working Working
2021 (i) CFL does not change its working capital management policies.
MAC Furniture 2 a Capital Capital 12
Summer (ii) CFL's proposed changes to working capital management policies are implemented from 1
Ltd. Management Management
January 2021.
Craft Working Working Discuss the forecast impact of the new working capital management policies on profitability,
2021
MAC Furniture 2 b Capital Capital cashflow, payable days and receivable days and make a recommendation whether or not to 6
Summer
Ltd. Management Management implement the new working capital management policies.
2021 Zebra Ltd. Financial Risk Futures Discuss the relevant considerations when deciding between futures and options contracts to
BFD 3 a 6
Summer (ZL) Management Options hedge ZL's interest rate risk.
Assuming KIBOR has increased by 0.75% at 1 June, illustrate the possible results of:
2021 Zebra Ltd. Financial Risk Futures (i) a futures hedge
BFD 3 b 11
Summer (ZL) Management Options (ii) an options hedge
Also recommend the best solution to ZL.
International International
2021 QuickCook Evaluate whether or not QCL should commence manufacturing ovens in Turkey. As part of your
BFD 4 a Investment Investment 17
Summer Ltd evaluation, comment on the cost, price and inflation assumptions made by the Directors of QCL.
Appraisal Appraisal
P a g e 6 | 392
Attempt
/ Year
2021 QuickCook Discuss how QCL might reduce the impact of restrictions on dividend remittance from Turkey to
BFD 4 b Investment Investment 4
Summer Ltd Pakistan after the investment had taken place if the government of Turkey imposed such a policy.
Appraisal Appraisal
SuperSky
2021 Internatio Mergers and Mergers and Determine a valuation for WL’s equity shares by using SIL's risk adjusted weighted average cost of
BFD 5 a 20
Summer nal Airlines Acquisitions Acquisitions capital.
Ltd
SuperSky
Compare the value of SIL and WL shareholdings before and after the merger to determine if their
2021 Internatio Mergers and Mergers and
BFD 5 b shareholders are likely to accept the terms of the share for share exchange offer proposed by SIL’s 5
Summer nal Airlines Acquisitions Acquisitions
directors.
Ltd
Weighted Weighted
2020
BFD KP Ltd 1 a average cost average cost Calculate the WACC of KPL. 6
Winter
of capital of capital
2020 Capital Asset Capital Asset Explain the purpose of the Capital Asset Pricing Model (CAPM) and discuss the weaknesses of
BFD KP Ltd 1 b 3
Winter Pricing Model Pricing Model CAPM as a way of estimating KPL's required return to its shareholders.
Weighted Weighted
2020 Comment on the finance director's statement regarding the role of WACC as KPL's 'minimum
BFD KP Ltd 1 c average cost average cost 3
Winter average rate of return'.
Weighted Weighted Discuss the circumstances under which KPL's current WACC can be used as the discount rate for
2020
BFD KP Ltd 1 d average cost average cost new project investment appraisal, and indicate other methods to determine a suitable discount 5
Winter
of capital of capital rate that could be adopted when it is not appropriate to use the current WACC.
2020 Capital Asset Capital Asset

BFD KP Ltd 1 e Determine a suitable risk adjusted discount rate to evaluate the new diversified product. 5
Winter Pricing Model Pricing Model
2020 Eco Investment Net Present Evaluate the proposed energy monitor implementation project by calculating the net present value
BFD 2 a 12
Winter Energy Appraisal Value / MIRR of the new project and its modified internal rate of rate return.
Write a report to EE's board of directors which evaluates the energy monitoring project. Your
2020 Eco Investment Sensitivity
BFD 2 b report should also include consideration of non-financial factors and an explanation of the benefits 8
Winter Energy Appraisal Analysis
of performing sensitivity analysis and simulation prior to making a final decision.
P a g e 7 | 392
Attempt
/ Year
Prepare a range of valuations for the shares of Dynamic Ltd. All valuations should be prepared as
2020 Dynamic Business Business
BFD 3 a at 30 September 2020 and use year-end discount factors, where applicable, presenting your 15
Winter Ltd Valuation Valuation
answers to the nearest thousand rupees.
2020 Dynamic Business Business Comment on the suitability of the assumptions made by the directors of Dynamic Ltd for preparing
BFD 3 b 5
Winter Ltd Valuation Valuation the valuations in part (a).
Peshawar Calculate the PKR amount receivable by PEC on 31 December 2020 if it uses:
Forward
Engineerin §no hedge, evaluate using the expected spot rate
2020 Financial Risk Money Market
BFD g 4 a §a forward contract with PEC's bank 11
Winter Management Hedge
Company §a money market hedge
OTC Option
Ltd §an over-the-counter option with PEC's bank
Peshawar
Engineerin
2020 Financial Risk Financial Risk Discuss the issues that should be taken into account by the PEC board when it considers whether
BFD g 4 b 7
Winter Management Management or not PEC should hedge the receipt of 20 million Bangladeshi Taka (BDT) at 31 December 2020.
Company
Ltd
2020 Super Variance Variance Calculate the relevant sales, materials, labour and variable overhead variances for the month of
MAC 5 a 11
Winter Cakes Ltd Analysis Analysis November 2020.
2020 Super Variance Variance Provide an operating statement reconciling budget contribution to actual contribution and actual
MAC 5 b 4
Winter Cakes Ltd Analysis Analysis profit for the month of November 2020.
2020 Super Variance Variance Prepare a report which explains the impact of the November 2020 operating statement to the
MAC 5 c 5
Winter Cakes Ltd Analysis Analysis board of Super Cakes Ltd and actions the board should consider.
Working Working
2019 Awam
MAC 1 a Capital Capital Advise whether it would be feasible for AL to adopt any of the above options. 15
Winter Limited
Management Management
Working Working
2019 Awam In case of opting for factoring arrangement with KI, briefly discuss the difficulties which AL may
MAC 1 b Capital Capital 4
Winter Limited encounter. Also discuss how these difficulties can be resolved.
2019 Karakorum Mergers and Mergers and Using the free cash flow method, determine the maximum price that KL may pay to the
BFD 2 a 13
Winter Limited Acquisitions Acquisitions shareholders of SL.
Assume that the offer of Rs. 450 million is accepted by SL’s shareholders. Discuss the impact of this
2019 Karakorum Mergers and Mergers and
BFD 2 b acquisition on control, gearing and earnings per share of KL if it is funded: 10
Winter Limited Acquisitions Acquisitions
(i) with new debt at 10%; or (ii) by issuance of shares.
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Attempt
/ Year
2019 Ghauri Investment Net Present
BFD 3 a Advise whether it is feasible for GL to bid for tender at a price suggested by the marketing director. 21
Winter Limited Appraisal Value
2019 Ghauri Investment Sensitivity
BFD 3 b Estimate the project’s sensitivity to: (i) sales price (ii) cost of capital 4
Winter Limited Appraisal Analysis
Greenline
2019 Financial Risk
BFD Investmen 4 a Options Determine the net profit/(loss) for GIL, if advice of the Investment Board has been followed. 12
Winter Management
ts Limited
Greenline
2019 Financial Risk Briefly discuss the relative advantages of using exchange traded options and over-the-counter
BFD Investmen 4 b Options 4
Winter Management (OTC) options.
ts Limited
Tezgam
2019 Portfolio
BFD Investmen 5 a Mutual Funds Using alpha value, recommend which mutual fund should be selected for investment. 14
Winter theory
t Limited
Tezgam
2019 Portfolio
BFD Investmen 5 b Mutual Funds Briefly discuss the limitations of using the alpha value for evaluating the investment. 3
Winter theory
t Limited
2019 Yellow Mergers and Mergers and Determine the share exchange ratio which must be offered to WL’s shareholders to gain their
BFD 1 a 18
Summer Limited Acquisitions Acquisitions acceptance. Also assess whether this ratio would be acceptable to YL’s shareholders.
2019 Yellow Mergers and Mergers and Identify and discuss other relevant factors that directors and shareholders of both companies may
BFD 1 b 6
Summer Limited Acquisitions Acquisitions consider while evaluating the proposed takeover.
Asset
2019 Red Investment
BFD 2 a Replacement Advise the most feasible option to the company. 15
Summer Limited Appraisal
Decisions
Carry out a sensitivity analysis in respect of the following at which your decision in (a) above would
2019 Red Investment Sensitivity change:
BFD 2 b 8
Summer Limited Appraisal Analysis (i) Ratio of maintenance cost between both options
(ii) Dollar rate
Working Working
2019 Blue
MAC 3 - Capital Capital Determine the minimum additional running finance amount that BL should seek from the banks. 16
Summer Limited
2019 Orange Financial Risk Forwards Advise which hedging option OL should adopt if expected spot rate on 31 August 2019 is JPY/PKR
BFD 4 a 10
Summer Limited Management Options 0.7181 – 0.7355.
P a g e 9 | 392
Attempt
/ Year
Determine how beneficial would it be for OL to use interest rate futures to hedge interest rate risk
2019 Orange Financial Risk Interest Rate if at the end of nine months, interest rates:
BFD 4 b 5
Summer Limited Management Futures (i) rise by 1.50% and futures price move to 85.25.
(ii) fall by 0.25% and futures price move to 86.75.
Right issue Right issue
2019 Green Calculate GL’s share price after the right issue, assuming that GL's current P/E ratio remains the
BFD 5 a and dividend and dividend 4
Summer Limited same. Also comment on Shahid Khan’s viewpoint regarding no effect on P/E ratio.
theory theory
2019 Green Dividend Dividend Comment on the viewpoint of Saleem Qadir in the light of Miller & Modigliani (MM) Theory of
BFD 5 b 3
Summer Limited Policy Policy Dividend Irrelevance.
Justify using MM Theory of Dividend Irrelevance that value of the company under each option
2019 Green Dividend Dividend would remain the same. Assume that there are no internal funds available with the company and
BFD 5 c 9
Summer Limited Policy Policy GL would have to finance the proposed redemption from the profit for the current year and/or
through right issue.
2019 Green Financing of Financing of Evaluate both financing options proposed by the directors and recommend which option should
BFD 5 d 6
Summer Limited Projects Projects be selected.
2018 Sun Public Mergers and Evaluate the financial viability of the demerger scheme for the shareholders of SPL using 10 years’
BFD 1 a Demerger 19
Winter Limited Acquisitions time horizon.
2018 Sun Public Mergers and List any four additional information that would assist the directors in evaluating the decision of
BFD 1 b Demerger 4
Winter Limited Acquisitions demerger.
The Pluto
2018 Group Financial Risk Multilateral
BFD 2 a Determine the amount of savings which can be achieved by PGL by using multilateral netting. 6
Winter Limited - Management Netting
Pakistan
The Pluto Interest Rate
2018 Group Financial Risk Swap
BFD 2 b Advise the best interest rate hedging strategy for KSL. 11
Winter Limited - Management Interest Rate
Pakistan Futures
Venus
2018 Adjusted Adjusted
BFD Trading 3 - Evaluate the above proposed contract by using adjusted present value method. 21
Winter Present Value Present Value
Limited
2018 Jupiter Transfer Transfer Develop a production plan on the basis of overall profitability of the company and determine the
MAC 4 - 23
Winter Limited Pricing Pricing increase in profit that could be achieved as compared to the existing policy.
Mars Determine the optimum investment mix for MIL if: (a) all projects are divisible and can be scaled
BFD Investmen 5 - upwards up to 50% and (b) all projects are indivisible and excess funds can be invested at 8% per 16
Winter Appraisal Rationing
t Limited annum.
P a g e 10 | 392
Attempt
/ Year
Tulip
2018 Mergers and Mergers and Evaluate whether the proposed acquisition would be beneficial for the existing shareholders of TTL
BFD Textile 1 - 25
Summer Acquisitions Acquisitions and BTL
Limited
Weta
2018 Portfolio Portfolio
BFD Pakistan 2 a Determine which company would you recommend for investment by WPL. 10
Summer theory theory
Limited
Weta Determine the revised systematic risk and expected return of WPL's equity investment portfolio
BFD Pakistan 2 b after investing in the company identified in part (a) above. Briefly discuss the impact of revised 6
Summer theory theory
Limited systematic risk and expected return.
Aqeeq Currency
2018 Pakistan Financial Risk Futures Advise which hedging option should APL adopt if expected spot rates at 31 August 2018 and 31
BFD 3 - 15
Summer (Private) Management Money Market December 2018 are Rs. 116.60 and Rs. 118.50 respectively.
Limited Hedge
2018 Investment On the basis of modified internal rate of return, determine whether OJL should carry out research
BFD OJ Limited 4 - MIRR 25
Summer Appraisal on upgradation of EDS-1.
Ikraam
2018 Variance Variance Compute the sales variances (price, mix, market share and market size) for the quarter ended 31
MAC (Private) 5 a 12
Summer Analysis Analysis March 2018.
Limited
Ikraam
2018 Variance Variance Prepare a brief commentary for the board of directors of IPL on the above variances and their
MAC (Private) 5 b 7
Summer Analysis Analysis impact on profitability of the company.
Limited
Investment Investment
Appraisal Appraisal
2017 Advise whether CT should initiate expansion of its steel production capacity by disposing of its
BFD CT Limited 1 - Weighted Weighted 18
Winter investment properties.
average cost average cost
GSI
2017 Dividend Dividend
BFD Company 2 a Briefly discuss any four factors which influence the dividend policy of a company. 4
Winter Policy Policy
Limited
GSI Weighted Weighted
2017 Estimate the effect on GSI’s weighted average cost of capital by the end of financial year 2018 if
BFD Company 2 b average cost average cost 20
Winter the stock analyst viewpoint remains valid.
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Attempt
/ Year
Moderax
2017 Company
BFD 3 - Investment Investment Advise whether MCL should proceed with the above investment. 24
Winter Pakistan
Appraisal Appraisal
Limited
Sohrab Working Working
2017
MAC Industries 4 - Capital Capital Determine which option SIL should adopt, if any. 15
Winter
Limited Management Management
Currency
Captain
2017 Financial Risk Futures
BFD (Private) 5 a Advise the feasible hedging options for each of the above transactions. 11
Winter Management Money Market
Limited
Hedge
Captain
2017 Financial Risk Devise the hedging strategy using stock future contracts and calculate the net outcome and hedge
BFD (Private) 5 b Stock Futures 8
Winter Management efficiency assuming that CPL’s incremental rate of borrowing is 10% per annum.
Limited
Investment
Net Present
Appraisal
2017 Dr Tahir Value
BFD 1 - Weighted Evaluate the above investment by using discounted cash flow technique. 27
Summer Lodhi Calculation of
average cost
WACC
of capital
Develop a production plan on the basis of overall profitability of the company and determine the
2017 Hamid Transfer Transfer
MAC 2 - increase in profit that could be achieved on the basis thereof, as compared to the profit under the 25
Summer Limited Pricing Pricing
existing policy.
Currency
Jhelum
2017 Financial Risk Futures Advise which of the two hedging options would be more feasible for JML if expected spot rates at
BFD Motors 3 a 12
Summer Management Money Market the end of August, September and October are Rs. 106.50, Rs. 105.00 and Rs. 106.20 respectively.
Limited
Hedge
Jhelum Explain how JML could use interest rate future to hedge its exposure to interest rate risk. Also
2017 Financial Risk Interest Rate
BFD Motors 3 b determine whether it would be beneficial for JML to use interest rate futures if at the end of three 5
Summer Management Futures
Limited months, spot interest rate and future prices move to 7.5% and 92.2 respectively.
Shah
2017
MAC Brothers 4 - Budgeting Budgeting Advise the most feasible selling price per bottle which SBL may fix for the next year. 14
Summer
Limited
Mars
2017 Petroleum Business Business Advise MPL about the IPO price and suggest the number of shares to be offered in the IPO
BFD 5 a 14
Summer (Private) Valuation Valuation assuming that entire amount would be spent in year 0.
Limited
P a g e 12 | 392
Attempt
/ Year
Mars
2017 Petroleum Business Business Write a brief memorandum to the board of directors discussing the advantages of leverage, for the
BFD 5 b 3
Summer (Private) Valuation Valuation shareholders of the company.
Limited
Ramzi Calculate the net amounts that RC would pay or receive each year on the swap transaction. Also
2016 Financial Risk Interest Rate
BFD Corporatio 1 a determine the net interest rate payable by RC if it chooses to exercise the swap option. 11
Winter Management Swap
n Discuss the merit(s) and demerit(s) of the swap transaction for RC.
Assume that spot rate of interest on 31 May 2017 moves to 8.5% per annum and theprice of June
Ramzi
2016 Financial Risk Interest Rate interest rate futures falls to 90, demonstrate how short-term interest rate futures can be used by
BFD Corporatio 1 b 6
Winter Management Futures RC to hedge against any rise in interest rate. Also determine the effective rate of interest on the
n
loan and hedge efficiency.
2016 Suffer Investment Net Present Using the net present value method, advise SL whether it would be feasible for the company to
BFD 2 a 23
Winter Limited Appraisal Value establish manufacturing plant.
2016 Suffer Investment Sensitivity
BFD 2 b Estimate the project’s sensitivity to the direct material costs. 3
Winter Limited Appraisal Analysis
Malik
BFD Investmen 3 a Determine the optimum investment mix for MIL. 11
ts Limited
Malik Assume that MIL wishes to invest in all the remaining available projects including upward scaling.
BFD Investmen 3 b For this purpose, it is negotiating a financing arrangement. Advise the maximum interest rate 9
ts Limited which MIL may offer.
2016 Smart Variance Variance Prepare a statement reconciling budgeted contribution for September 2016 with the actual
MAC 4 - 17
Winter Limited Analysis Analysis contribution, using planning and operational variances.
Discuss whether the proposed acquisition would be beneficial for the existing shareholders of ML
2016 Mangal Mergers and Mergers and and SL if:
BFD 5 a 10
Winter Limited Acquisitions Acquisitions - the market is weak form efficient;
- the market is strong form efficient.
2016 Mangal Mergers and Mergers and
BFD 5 b Discuss the other factors which may influence the interests of the shareholders. 10
Winter Limited Acquisitions Acquisitions
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Attempt
/ Year
Golden Write a report for presentation to the board of directors covering the following matters:
2016 Sources of Sources of
BFD Industries 1 a (a) Analysis of GIL’s policy with respect to cash flow management and its impact on 6
Summer finance finance
Limited GIL’s cost of capital and its ability to pay dividend.
Revised value of net assets, profit after tax and cash flows if GIL increases its debt
Golden
2016 Sources of Sources of equity ratio to:
BFD Industries 1 b 12
Summer finance finance - 60:40 which is the maximum limit allowed by GIL’s banks.
Limited
- 50:50 which is the prevailing industry norm in which GIL operates.
Golden
2016 Sources of Sources of Suggestions and recommendations regarding anticipated cash flows and future dividend
BFD Industries 1 c 7
Summer finance finance prospects.
Limited
Violet
2016 Mergers and Mergers and Determine the ratio of share exchange which must be offered to shareholders of BTL to gain their
BFD Telecom 2 a 12
Summer Acquisitions Acquisitions acceptance and assess whether this ratio would be acceptable to shareholders of VTL also.
Ltd.
Violet
2016 Mergers and Mergers and Discuss five other relevant factors that the directors/shareholders of both companies may consider
BFD Telecom 2 b 5
Summer Acquisitions Acquisitions in evaluating the proposed merger.
Ltd.
White Asset
2016 Investment
BFD Garments 3 - Replacement Determine the preferred replacement policy for the cutting machine. 17
Summer Appraisal
Limited Decisions
Modern
2016 Financing of Financing of
BFD Vehicles 4 - Analyse both the financing options and recommend which financing option should be selected. 24
Summer Projects Projects
Limited
SilverLine
2016 Investment Lease vs
BFD Rental 5 - Recommend whether it would be advisable for SRS to purchase the cars. 17
Summer Appraisal Borrow
Services
National
2015 Mergers and Mergers and Based on an analysis of Free Cash Flows, calculate the bid price that the local group may offer for
BFD Airline 1 - 21
Winter Acquisitions Acquisitions the acquisition of 40% stake in NAL.
Limited
2015 Ryan Mergers and Analyze and comment whether NPL would be able to comply with debt-equity covenant imposed
BFD 2 a Demerger 12
Winter Group Acquisitions by the bank over the five-year period.
2015 Ryan Mergers and
BFD 2 b Demerger Briefly discuss the difficulties that may be encountered by management of NPL after the buy-out. 3
Winter Group Acquisitions
P a g e 14 | 392
Attempt
/ Year
Currency
2015 Wonder Financial Risk Futures
BFD 3 - Analyse and devise a hedging strategy for WL and ME. 10
Winter Limited Management Money Market
Hedge
BFD Akhtar 4 a Briefly discuss the difference between systematic risk and unsystematic risk. 2
Winter theory theory
Determine the systematic risk and expected return of Akhtar’s equity investment portfolio if he
BFD Akhtar 4 b goes ahead with his proposed investments. Also discuss briefly the impact of revised systematic 7
Winter theory theory
risk on Akhtar’s investment decision.
2015 Dividend Dividend Evaluate the implication of Ravi Limited and Jhelum Limited’s proposed financial strategies and
BFD Akhtar 4 c 8
Winter Policy Policy advise Akhtar on how these strategies might affect his investment decisions.
Impression
2015 Home Sources of Sources of
BFD 5 a Advise the management regarding the amount to be raised in terms of debt and equity. 8
Winter Furnishing finance finance
Limited
Impression In a recent report, treasurer of the company has forecasted that in one year’s time, yield to
2015 Home Sources of Sources of maturity of both TFCs would decline to 10% and company’s PE ratio would increase to 6.3.
BFD 5 b 7
Winter Furnishing finance finance Assuming that the treasurer’s predictions hold true, determine the increase in profit before interest
Limited and tax during the next year, to ensure that desired debt equity ratio is maintained.
2015 Sandra
BFD 6 - Investment Investment Recommend whether it is feasible for SL to assemble Ferris. 22
Winter Limited
Appraisal Appraisal
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TOPIC WISE ANALYSIS
2015 2016 2016 2017 2017 2018 2018 2019 2019 2020 2021 2021 2022 Grand
Row Labels
Winter Summer Winter Summer Winter Summer Winter Summer Winter Winter Summer Winter Summer Total
BFD Marks 100 100 83 61 85 81 77 84 81 80 63 66 100 1,061
Adjusted Present Value 21 22 43

Business Valuation 17 20 21 58
Capital Asset Pricing Model 8 8 16
Dividend Policy 8 4 12 24
Financial Risk Management 10 17 17 19 15 17 15 16 18 17 16 20 197
Financing of Projects 24 6 30
International Investment Appraisal 22 24 21 67
Investment Appraisal 34 46 27 18 25 16 23 25 20 25 12 271
Mergers and Acquisitions 36 17 20 25 23 24 23 25 20 213
Portfolio theory 9 16 17 42
Right issue and dividend theory 4 4
Sources of finance 15 25 5 5 50
Weighted average cost of capital 20 14 12 46
MAC Marks (removed from

0 0 17 39 15 19 23 16 19 20 37 34 239
syllabus of Summer 2022)
Budgeting 14 14
Decision making 19 19
Forecasting and budgeting 15 15
Linear programming 19 19
Transfer Pricing 25 23 48
Variance Analysis 17 19 20 56
Working Capital Management 15 16 19 18 68
Grand Total 100 100 100 100 100 100 100 100 100 100 100 100 100 1,300
P a g e 16 | 392

BFD Past Papers Analysis Muzzammil Munaf

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BFD Past Papers Analysis Muzzammil Munaf

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IQ SCHOOL OF FINANCE

CFAP 04 – BUSINESS FINANCE DECISIONS

BFD PAST PAPERS ANALYSIS

Prepare a cashflow forecast for the year to 31 December 2021, assuming:

2020 Capital Asset Capital Asset

BFD Marks 100 100 83 61 85 81 77 84 81 80 63 66 100 1,061

Adjusted Present Value 21 22 43

MAC Marks (removed from

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