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Level 3
Thursday 10 November 2016
Time: 3 hours
Paper Reference
ASE3003
You will need:
Instructions

Do not open this examination paper until you are told to do so by the supervisor.

Use black/blue ink or ball-point pen – pencil can only be used for graphs, charts, diagrams, etc.

Write on both sides of the page.

All answers must be correctly numbered but need not be in numerical order.

If you need more space, use the additional sheets provided. Write your name, candidate number and question number on each sheet and attach them to the inside of your answer book. State, on the front of your answer book, the number of additional sheets attached.

Workings must be shown.

Information

The total mark for this paper is 100.

There are eight questions in this question paper.

The marks for each question are shown in brackets – use this as a guide as to how much time to spend on each question.

You may use mathematical and statistical tables.

You may use a calculator provided the calculator gives no printout, has no word display facilities, is silent and cordless. The provision of batteries and their condition is your responsibility.

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1/1/1/1/1/1/1

*P50583A* Turn over

1 In January 2016, Vin’s house is valued at £198,000.

Vin hopes that the value will increase by 3% per annum for each of the next four years, with the percentage increase each year based on the value at the start of that year.

(a) Calculate the expected:

 (i) value in January 2020 (2) (ii) increase in value over the four-year period. (2) Vin estimates that the house has fallen in value by 3% per annum from January 2010 to January 2016, with the percentage fall each year based on the value at the start of that year. (b) Calculate the estimated: (i) value in January 2010 (3) (ii) fall in value between January 2015 and January 2016. (2) Vin uses the products method to check his bank balance. He calculates that he is receiving interest on his bank account at the rate of 0.015% per day. (c) Calculate the: (i) annual rate of interest paid to Vin, based on simple interest. Assume that 1 year = 365 days. (2) (ii) amount of simple interest received for a period of 7 days when the bank balance was £2,900.35 and the rate of interest received was 0.015% per day. (2)

(Total for Question 1 = 13 marks)

2

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2

Usha bought units in a unit trust and invested for income. She invested £54,400 in a unit trust with an offer price of £85 per unit, and sold the units after three years at the same price. During this period she received income from the units of £13,056. This income was not reinvested in units.

(a) Calculate the:

 (i) number of units purchased (2) (ii) percentage yield per annum (3) (iii) three-year income per unit. (2) Usha paid the following charges: Fee on purchase: 0.2% of the sum invested Fee on sale: 0.3% of the sum received for the sale Fund management fees of £408 (b) Calculate: (i) the total charges paid (2) (ii) the total charges as a percentage of the original investment (2) (iii) Usha’s income net of charges. (2)

(Total for Question 2 = 13 marks)

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3

Turn over 3

In a particular period, Manufacturer M sells 96,000 units of Product P at a selling price of £37 per unit, and makes a profit of £84,750.

The variable costs of producing Product P are £31 per unit.

(a) Calculate the:

 (i) break-even point in units for this period (4) (ii) fixed costs for this period. (2) At another site, Manufacturer M also produces Product Q. Product Q has fixed costs of production of £81,000 during a period. The variable costs of producing a unit of Product Q are as follows: £ Components £24.80 Labour £10.40 Distribution expenses £2.60 (b) Calculate, for Product Q in this period, the: (i) variable cost per unit (1) (ii) total cost of producing 5,000 units (2) (iii) maximum number of units that could be produced at a total cost less than £173,000. (3)

(Total for Question 3 = 12 marks)

4

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4

At the end of the year 2015 the following information applied to Company C:

Current liabilities

£2,350,000

 Current ratio 2.5 : 1 Acid test ratio 0.8 : 1 (a) Calculate the: (i) current assets (2) (ii) stock held by Company C. (2) (b) (i) State whether you think the liquidity of Company C is healthy or not, based on the current ratio. You must give a reason. (1) (ii) State whether you think the liquidity of Company C is healthy or not, based on the acid test ratio. You must give a reason. (1) During 2015 the following information relates to Trader T. £ Net sales 1,905,000 Cost of goods sold 1,196,000 Opening stock value 62,350 Closing stock value 67,650 Overhead expenses 243,000 (c) Calculate, for Trader T, the: (i) net profit (2) (ii) net purchases (2) (iii) rate of stockturn (stock turnover per annum). (3)

(Total for Question 4 = 13 marks)

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5

Turn over 5

Investment Project A has a cost of £500,000 and a projected payback period of three years and three months. The expected net cash inflow in the first three years is £150,000 per year.

(a) Calculate the expected net cash inflow for Investment Project A in Year 4.

 (3) Investment Project B has a discount factor for a particular year of 0.731 and an expected net present value for that year of £91,375. (b) Calculate the expected net cash inflow for Investment Project B for that year. (2) In Year 1, Investment Project B has an expected net cash inflow of £120,000 and an expected net present value of £108,120. (c) Calculate the: (i) discount factor used for Year 1 (2) (ii) rate of return used in the calculation, showing your workings. (2) Investment Project B has a total expected net present value of negative £9,100 at a rate of return of 7% and negative £145,600 at a rate of return of 10%. (d) Calculate the internal rate of return for Investment Project B. (3)

(Total for Question 5 = 12 marks)

6

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6

Tia was owed £5,500 by Trader X, who was declared bankrupt. Tia was an unsecured creditor. Unsecured creditors received payment of £0.30 in the £1.

(a) Calculate the amount:

 (i) Tia received (2) (ii) owed to an unsecured creditor who was paid £2,880 (2) (iii) paid to a creditor who was owed £28,000, half of which was secured. (3) The total owed to unsecured creditors by Trader X was £271,500. Trader X also owed £53,000 to secured creditors. The expenses of winding up the business were £7,200. (b) Calculate the value of the trader’s assets achieved at liquidation. (3) (c) Express this value of the assets as a percentage of the liabilities before liquidation. (3)

(Total for Question 6 = 13 marks)

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7

Turn over 7

A factory machine that cost £2,500,000 is depreciated for three years by the diminishing balance method. At the end of the third year, its book value is £540,000.

(a) Calculate the

 (i) annual rate of depreciation (4) (ii) amount of depreciation in the first year (2) (iii) book value at the end of the second year. (2) At the end of the third year, when the book value is £540,000, the depreciation method for the machine is changed for future years to the equal instalment (straight-line) method. Four years later, seven years after the original purchase, the scrap value of the machine is £20,000. (b) Calculate the: (i) annual depreciation for each of these four years (2) (ii) book value one year before the machine is scrapped. (2)

(Total for Question 7 = 12 marks)

8

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8

Three investments, A, B and C, are grouped into a single fund with weightings of 13, 15 and 10 respectively. Over a period of five years they all increase in value, with each new value expressed as an index, as shown in the following information.

Investment

Index

Weighting

 A 114 13 B 190 15 C 133 10

(a) Calculate the:

 (i) composite (weighted) index for the three investments combined (5) (ii) average percentage increase in the fund per annum over the five-year period. (2) A second fund includes the same three investments, A, B and C, together with a fourth investment D. The weightings of investments A, B and C are as above, and the weighting of investment D is 12. Over the same period, the weighted index of the four investments combined is 143. (b) Calculate the index representing the new value of investment D at the end of the five-year period. (5)

(Total for Question 8 = 12 marks)

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TOTAL FOR PAPER = 100 MARKS

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