You have just been appointed Financial Controller of Y, a marketing consultancy.
You are in a meeting with the Chief Executive Officer (CEO) of Y, and have been discussing the need for a major upgrade of all the information systems throughout Y, as they are all very old.
Knowing that major change should be managed effectively, you have suggested that Y should have a 'systems steering committee'.
Advise the CEO which of the following should be included in the terms of reference of the steering committee.
An oil company has entered into a joint venture with a competing oil company to develop a new oil field. The joint venture arrangement is intended to mitigate the risks associated with developing the oil field.
The following disclosure appears in the oil company's risk report:
"Many of our large projects and operations are conducted through joint ventures. These arrangements involve complex risk allocation and indemnification arrangements and we have less control over these activities than we would have if we had full ownership and control. Our partners may have economic or business interests that are opposed to ours, and may exercise the right to block key decisions or actions. We believe the joint arrangement is in our best interest."
Which of the following statements are correct?
R plc is considering an investment of $1,100,000 in a new machine which is expected to have substantial cash inflows over the next five years.
The annual cash flows from this investment and their probability are shown below:
Annual cash flow ($) Probability
200,000 0.4
280,000 0.5
350,000 0.1
At the end of its five-year life, the asset is expected to sell for $100,000. The cost of capital is 5%.
What is the Expected Net Present Value?
Give your answer to the nearest whole $.
TRF is conducting a post completion audit on an investment in a pollution control machine that has reached the end of its five year useful life.
TRF could have been heavily fined if the machine had failed to keep pace with the output of emissions, measured in units. TRF's cost of capital is 10%. When the machine was purchased, there was a choice of three machines on the market:
TRF purchased the Big machine, but annual requirements only exceeded 600,000 once, in year 3, when 720,000 units of emissions were emitted.
Calculate the amount that the post completion audit shows TRF overpaid for the ownership costs associated with this machine.
Give your answer to the nearest whole $ (in $'000s).
TESTED 03 May 2024
