SECTION A - Compulsory

Question 1
The summarised annual financial statements for Eskdale Plc are given below for the year to 31 December 2013, and three years later for the year to 31 December 2016. The financial statements show that Return on Capital Employed stood at 10.8% in 2013 and 5.6% in 2016. By analysing the drivers of earnings based on the financial statement data provided, you should explain why profitability has declined and the key drivers which have caused this. The average tax rate for both years on financing activities is 27%.

SECTION B - ANSWER ONE QUESTION.

Question 2

a. Describe three ‘cheap' methods of equity valuation including the process involved, and the advantages and disadvantages of each method.

b. Describe the process of the fundamental approach to valuation and how this differs to the cheap methods mentioned in part a above.

Question 3

In May 2010, a UK listed company announced that it would buy back as much as 45% of its shares, with the repurchase being financed by new borrowings.

a. Why do firms repurchase stock?

b. In respect of the above case discuss what is the likely effect the repurchase will have on earnings per share and earnings per share growth.

c. Will the repurchase add value to shareholders, and why?

Question 4
The following information has been provided in £millions for Xtrixt Plc:

                                     2016  2017  2018  2019  2020

Operating Income (OI)       2000  2050   2200  2370

Net Operating Assets (NOA)  6000  6350  6600  7200  7400

Return on Operating Assets (RNOA) 33.33%  32.28%  33.33%  32.92%

The required rate of return is 9%.

The book value of Net Financial Obligations is £2,000 million. Xtrixt Plc is expected to have a growth rate of 4% The company has 500 million shares.

Calculate the Value Per Share for Xtrixt Plc.

Attachment:- Data.rar