Transcription of F3 – Financial Strategy
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F3 – Financial Strategy
Financial Strategy 1 May 2014 Strategic Level Paper F3 Financial Strategy May 2014 examination Examiner s Answers Question One Suggested Approach In part (a), first identify the key issues and then discuss each one in turn. In part (b)(i), first calculate the cost of equity and the post tax cost of debt. The cost of equity can be obtained using the CAPM formula and the post tax cost of debt can be calculated from the interest cost given by deducting tax of 30%. Next calculate the market value of equity based on the number of shares in issue (obtained from the pre-seen Financial data) multiplied by the share price provided in the question. The final piece of data required to complete the WACC calculation is the value of debt which can again be obtained from the Financial statements provided in the pre-seen material. In part (b)(ii), use discounted cash flow (DCF) analysis to calculate the value of Smart Bathrooms as at 30 June 2014.
Financial Strategy 1 May 2014 Strategic Level Paper . F3 – Financial Strategy . May 2014 examination . Examiner’s Answers. Question One . Suggested Approach
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