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  • 10 Marks

SCS – MAR 2024 – L3 – Q3 – Functional strategies

Explain the potential benefits of resource sharing through common IT systems at Prestige.

When five years ago the present regional divisional structure of Greater Accra, Ashanti, and Eastern was formalized, an attempt was made to ensure that common systems and ways of working were adopted across each of the three regions. However, due to the pressures on the Company, this was never fully implemented.

Required:
Explain the potential benefits of resource sharing (configuring an organization’s computing system in such a way that the information and resources within it can be accessed, and remotely accessed, across multiple administrative domains) to Prestige if they adopt common IT systems.

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  • 10 Marks

SCS – MAR 2024 – L3 – Q3 – Functional strategies

This Question Has a Case Study: 
SCS – Mar 2024 – L3 – “REAL ESTATE”

Explain the potential benefits of resource sharing through common IT systems at Prestige.

  • SCS – Mar 2024 – L3 – “REAL ESTATE”

When five years ago the present regional divisional structure of Greater Accra, Ashanti, and Eastern was formalized, an attempt was made to ensure that common systems and ways of working were adopted across each of the three regions. However, due to the pressures on the Company, this was never fully implemented.

Required:
Explain the potential benefits of resource sharing (configuring an organization’s computing system in such a way that the information and resources within it can be accessed, and remotely accessed, across multiple administrative domains) to Prestige if they adopt common IT systems.

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  • 5 Marks

AFM – May 2016 – L3 – Q3c – The role of the treasury function in multinationals

Prepare a memo explaining the potential benefits of treasury centralization for multinational subsidiaries.

c) Drake Limited is a Ghanaian-registered multinational company with FIVE subsidiaries in Europe, Asia, and Africa. These subsidiaries have traditionally been allowed a large amount of autonomy, but Drake Limited is proposing to centralize most of the group’s treasury management operations.

Required:
Acting as Group Head of Finance for Drake Limited, prepare a memo suitable for distribution to Senior Management of each of the subsidiaries, explaining the potential benefits of treasury centralization. (5 marks)

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  • 5 Marks

AFM – May 2016 – L3 – Q3c – The role of the treasury function in multinationals

Prepare a memo explaining the potential benefits of treasury centralization for multinational subsidiaries.

c) Drake Limited is a Ghanaian-registered multinational company with FIVE subsidiaries in Europe, Asia, and Africa. These subsidiaries have traditionally been allowed a large amount of autonomy, but Drake Limited is proposing to centralize most of the group’s treasury management operations.

Required:
Acting as Group Head of Finance for Drake Limited, prepare a memo suitable for distribution to Senior Management of each of the subsidiaries, explaining the potential benefits of treasury centralization. (5 marks)

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  • 10 Marks

MA – May 2019 – L2 – Q1a – Decision making techniques

Assess the financial impact of purchasing a new machine on a manufacturing company’s profitability.

Hukportie Ltd is a manufacturer of product “Okwada” which is sold for GH¢5 per unit. Variable costs of production are currently GH¢3 per unit, and fixed costs excluding depreciation is GH¢350,000. The current machine which was purchased for GH¢120,000 has a written down value of GH¢20,000 and a resale value of GH¢12,000. This can however be used for the next four years.

A new machine is available which would cost GH¢90,000. This could be used to make product “Okwada” for a variable cost of only GH¢2.50 per unit. Fixed costs, however, would increase by GH¢7,500 per annum as a direct consequence of purchasing the machine. The machine would have an expected life of 4 years and a resale value after that time of GH¢8,000. Sales of product Okwada are estimated to be 75,000 units per annum.

Hukportie limited expects to earn at least 12% per annum from its investments. Taxation and depreciation should be ignored.

Required:

Advise whether Hukportie Ltd should purchase the new machine. (10 marks)

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  • 10 Marks

MA – May 2019 – L2 – Q1a – Decision making techniques

Assess the financial impact of purchasing a new machine on a manufacturing company’s profitability.

Hukportie Ltd is a manufacturer of product “Okwada” which is sold for GH¢5 per unit. Variable costs of production are currently GH¢3 per unit, and fixed costs excluding depreciation is GH¢350,000. The current machine which was purchased for GH¢120,000 has a written down value of GH¢20,000 and a resale value of GH¢12,000. This can however be used for the next four years.

A new machine is available which would cost GH¢90,000. This could be used to make product “Okwada” for a variable cost of only GH¢2.50 per unit. Fixed costs, however, would increase by GH¢7,500 per annum as a direct consequence of purchasing the machine. The machine would have an expected life of 4 years and a resale value after that time of GH¢8,000. Sales of product Okwada are estimated to be 75,000 units per annum.

Hukportie limited expects to earn at least 12% per annum from its investments. Taxation and depreciation should be ignored.

Required:

Advise whether Hukportie Ltd should purchase the new machine. (10 marks)

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  • 20 Marks

FM – July 2023 – L2 – Q2 – Mergers and acquisitions

Calculate the value of a combined business after a merger, determine the maximum and minimum acceptable prices for the merger, and evaluate the type of merger.

Amanfi Ltd manufactures cooking oil for the local markets in Ghana. The management of Amanfi Ltd believes that by merging with one of their input suppliers, Aseebu Ltd, the company will be able to control supply, thus giving the Amanfi Group a low-price advantage in the market. Aseebu Ltd is a key supplier of inputs to companies in the cooking oil industry. The financial statements of the two companies are shown below:

Income Statement for the past Five Years (Amanfi Ltd)

Year (Million GH¢) 2018 2019 2020 2021 2022 (current year)
Sales 3,720 4,092 4,500 4,950 5,442
Cost of Sales (1,674) (1,841) (2,025) (2,228) (2,449)
Operating Profit 2,046 2,251 2,475 2,722 2,993
Finance Cost (252) (278) (305) (336) (369)
Earnings Before Tax 1,794 1,973 2,170 2,386 2,624
Tax @ 30% (538) (592) (651) (716) (787)
Earnings After Tax 1,256 1,381 1,519 1,670 1,837

Income Statement for the past Five Years (Aseebu Ltd)

Year (Million GH¢) 2018 2019 2020 2021 2022 (current year)
Sales 1,860 2,046 2,250 2,475 2,496
Cost of Sales (837) (921) (1,013) (1,114) (1,123)
Operating Profit 1,023 1,125 1,237 1,361 1,373
Finance Cost (126) (139) (153) (168) (169)
Earnings Before Tax 897 986 1,084 1,193 1,204
Tax @ 30% (269) (296) (325) (358) (361)
Earnings After Tax 628 690 759 835 843

Additional Information:
Amanfi Ltd and Aseebu Ltd have beta of 1.6 and 1.1 respectively. The government treasury bill rate pays a yield of 8% and risk premium on the market is 17%. If the merger goes through, the combined company’s earnings after tax will grow at the same rate as Amanfi Ltd. The merger will lead to annual cost savings of GH¢850 million in perpetuity.

Required:
a) As a Finance Manager, calculate the value of the combined business based on the present value of expected earnings. (8 marks)
b) What is the maximum amount that Amanfi Ltd should pay for Aseebu Ltd? (4 marks)
c) What is the minimum bid that Aseebu Ltd shareholders should be prepared to accept? (4 marks)
d) Calculate the gain/loss from the merger. (2 marks)
e) Identify and explain the type of merger between Amanfi Ltd and Aseebu Ltd. (2 marks)

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  • 20 Marks

FM – July 2023 – L2 – Q2 – Mergers and acquisitions

Calculate the value of a combined business after a merger, determine the maximum and minimum acceptable prices for the merger, and evaluate the type of merger.

Amanfi Ltd manufactures cooking oil for the local markets in Ghana. The management of Amanfi Ltd believes that by merging with one of their input suppliers, Aseebu Ltd, the company will be able to control supply, thus giving the Amanfi Group a low-price advantage in the market. Aseebu Ltd is a key supplier of inputs to companies in the cooking oil industry. The financial statements of the two companies are shown below:

Income Statement for the past Five Years (Amanfi Ltd)

Year (Million GH¢) 2018 2019 2020 2021 2022 (current year)
Sales 3,720 4,092 4,500 4,950 5,442
Cost of Sales (1,674) (1,841) (2,025) (2,228) (2,449)
Operating Profit 2,046 2,251 2,475 2,722 2,993
Finance Cost (252) (278) (305) (336) (369)
Earnings Before Tax 1,794 1,973 2,170 2,386 2,624
Tax @ 30% (538) (592) (651) (716) (787)
Earnings After Tax 1,256 1,381 1,519 1,670 1,837

Income Statement for the past Five Years (Aseebu Ltd)

Year (Million GH¢) 2018 2019 2020 2021 2022 (current year)
Sales 1,860 2,046 2,250 2,475 2,496
Cost of Sales (837) (921) (1,013) (1,114) (1,123)
Operating Profit 1,023 1,125 1,237 1,361 1,373
Finance Cost (126) (139) (153) (168) (169)
Earnings Before Tax 897 986 1,084 1,193 1,204
Tax @ 30% (269) (296) (325) (358) (361)
Earnings After Tax 628 690 759 835 843

Additional Information:
Amanfi Ltd and Aseebu Ltd have beta of 1.6 and 1.1 respectively. The government treasury bill rate pays a yield of 8% and risk premium on the market is 17%. If the merger goes through, the combined company’s earnings after tax will grow at the same rate as Amanfi Ltd. The merger will lead to annual cost savings of GH¢850 million in perpetuity.

Required:
a) As a Finance Manager, calculate the value of the combined business based on the present value of expected earnings. (8 marks)
b) What is the maximum amount that Amanfi Ltd should pay for Aseebu Ltd? (4 marks)
c) What is the minimum bid that Aseebu Ltd shareholders should be prepared to accept? (4 marks)
d) Calculate the gain/loss from the merger. (2 marks)
e) Identify and explain the type of merger between Amanfi Ltd and Aseebu Ltd. (2 marks)

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  • 10 Marks

SCS – MAR 2024 – L3 – Q3 – Functional strategies

Explain the potential benefits of resource sharing through common IT systems at Prestige.

When five years ago the present regional divisional structure of Greater Accra, Ashanti, and Eastern was formalized, an attempt was made to ensure that common systems and ways of working were adopted across each of the three regions. However, due to the pressures on the Company, this was never fully implemented.

Required:
Explain the potential benefits of resource sharing (configuring an organization’s computing system in such a way that the information and resources within it can be accessed, and remotely accessed, across multiple administrative domains) to Prestige if they adopt common IT systems.

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  • 10 Marks

SCS – MAR 2024 – L3 – Q3 – Functional strategies

This Question Has a Case Study: 
SCS – Mar 2024 – L3 – “REAL ESTATE”

Explain the potential benefits of resource sharing through common IT systems at Prestige.

  • SCS – Mar 2024 – L3 – “REAL ESTATE”

When five years ago the present regional divisional structure of Greater Accra, Ashanti, and Eastern was formalized, an attempt was made to ensure that common systems and ways of working were adopted across each of the three regions. However, due to the pressures on the Company, this was never fully implemented.

Required:
Explain the potential benefits of resource sharing (configuring an organization’s computing system in such a way that the information and resources within it can be accessed, and remotely accessed, across multiple administrative domains) to Prestige if they adopt common IT systems.

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  • 5 Marks

AFM – May 2016 – L3 – Q3c – The role of the treasury function in multinationals

Prepare a memo explaining the potential benefits of treasury centralization for multinational subsidiaries.

c) Drake Limited is a Ghanaian-registered multinational company with FIVE subsidiaries in Europe, Asia, and Africa. These subsidiaries have traditionally been allowed a large amount of autonomy, but Drake Limited is proposing to centralize most of the group’s treasury management operations.

Required:
Acting as Group Head of Finance for Drake Limited, prepare a memo suitable for distribution to Senior Management of each of the subsidiaries, explaining the potential benefits of treasury centralization. (5 marks)

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  • 5 Marks

AFM – May 2016 – L3 – Q3c – The role of the treasury function in multinationals

Prepare a memo explaining the potential benefits of treasury centralization for multinational subsidiaries.

c) Drake Limited is a Ghanaian-registered multinational company with FIVE subsidiaries in Europe, Asia, and Africa. These subsidiaries have traditionally been allowed a large amount of autonomy, but Drake Limited is proposing to centralize most of the group’s treasury management operations.

Required:
Acting as Group Head of Finance for Drake Limited, prepare a memo suitable for distribution to Senior Management of each of the subsidiaries, explaining the potential benefits of treasury centralization. (5 marks)

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  • 10 Marks

MA – May 2019 – L2 – Q1a – Decision making techniques

Assess the financial impact of purchasing a new machine on a manufacturing company’s profitability.

Hukportie Ltd is a manufacturer of product “Okwada” which is sold for GH¢5 per unit. Variable costs of production are currently GH¢3 per unit, and fixed costs excluding depreciation is GH¢350,000. The current machine which was purchased for GH¢120,000 has a written down value of GH¢20,000 and a resale value of GH¢12,000. This can however be used for the next four years.

A new machine is available which would cost GH¢90,000. This could be used to make product “Okwada” for a variable cost of only GH¢2.50 per unit. Fixed costs, however, would increase by GH¢7,500 per annum as a direct consequence of purchasing the machine. The machine would have an expected life of 4 years and a resale value after that time of GH¢8,000. Sales of product Okwada are estimated to be 75,000 units per annum.

Hukportie limited expects to earn at least 12% per annum from its investments. Taxation and depreciation should be ignored.

Required:

Advise whether Hukportie Ltd should purchase the new machine. (10 marks)

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  • 10 Marks

MA – May 2019 – L2 – Q1a – Decision making techniques

Assess the financial impact of purchasing a new machine on a manufacturing company’s profitability.

Hukportie Ltd is a manufacturer of product “Okwada” which is sold for GH¢5 per unit. Variable costs of production are currently GH¢3 per unit, and fixed costs excluding depreciation is GH¢350,000. The current machine which was purchased for GH¢120,000 has a written down value of GH¢20,000 and a resale value of GH¢12,000. This can however be used for the next four years.

A new machine is available which would cost GH¢90,000. This could be used to make product “Okwada” for a variable cost of only GH¢2.50 per unit. Fixed costs, however, would increase by GH¢7,500 per annum as a direct consequence of purchasing the machine. The machine would have an expected life of 4 years and a resale value after that time of GH¢8,000. Sales of product Okwada are estimated to be 75,000 units per annum.

Hukportie limited expects to earn at least 12% per annum from its investments. Taxation and depreciation should be ignored.

Required:

Advise whether Hukportie Ltd should purchase the new machine. (10 marks)

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  • 20 Marks

FM – July 2023 – L2 – Q2 – Mergers and acquisitions

Calculate the value of a combined business after a merger, determine the maximum and minimum acceptable prices for the merger, and evaluate the type of merger.

Amanfi Ltd manufactures cooking oil for the local markets in Ghana. The management of Amanfi Ltd believes that by merging with one of their input suppliers, Aseebu Ltd, the company will be able to control supply, thus giving the Amanfi Group a low-price advantage in the market. Aseebu Ltd is a key supplier of inputs to companies in the cooking oil industry. The financial statements of the two companies are shown below:

Income Statement for the past Five Years (Amanfi Ltd)

Year (Million GH¢) 2018 2019 2020 2021 2022 (current year)
Sales 3,720 4,092 4,500 4,950 5,442
Cost of Sales (1,674) (1,841) (2,025) (2,228) (2,449)
Operating Profit 2,046 2,251 2,475 2,722 2,993
Finance Cost (252) (278) (305) (336) (369)
Earnings Before Tax 1,794 1,973 2,170 2,386 2,624
Tax @ 30% (538) (592) (651) (716) (787)
Earnings After Tax 1,256 1,381 1,519 1,670 1,837

Income Statement for the past Five Years (Aseebu Ltd)

Year (Million GH¢) 2018 2019 2020 2021 2022 (current year)
Sales 1,860 2,046 2,250 2,475 2,496
Cost of Sales (837) (921) (1,013) (1,114) (1,123)
Operating Profit 1,023 1,125 1,237 1,361 1,373
Finance Cost (126) (139) (153) (168) (169)
Earnings Before Tax 897 986 1,084 1,193 1,204
Tax @ 30% (269) (296) (325) (358) (361)
Earnings After Tax 628 690 759 835 843

Additional Information:
Amanfi Ltd and Aseebu Ltd have beta of 1.6 and 1.1 respectively. The government treasury bill rate pays a yield of 8% and risk premium on the market is 17%. If the merger goes through, the combined company’s earnings after tax will grow at the same rate as Amanfi Ltd. The merger will lead to annual cost savings of GH¢850 million in perpetuity.

Required:
a) As a Finance Manager, calculate the value of the combined business based on the present value of expected earnings. (8 marks)
b) What is the maximum amount that Amanfi Ltd should pay for Aseebu Ltd? (4 marks)
c) What is the minimum bid that Aseebu Ltd shareholders should be prepared to accept? (4 marks)
d) Calculate the gain/loss from the merger. (2 marks)
e) Identify and explain the type of merger between Amanfi Ltd and Aseebu Ltd. (2 marks)

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  • 20 Marks

FM – July 2023 – L2 – Q2 – Mergers and acquisitions

Calculate the value of a combined business after a merger, determine the maximum and minimum acceptable prices for the merger, and evaluate the type of merger.

Amanfi Ltd manufactures cooking oil for the local markets in Ghana. The management of Amanfi Ltd believes that by merging with one of their input suppliers, Aseebu Ltd, the company will be able to control supply, thus giving the Amanfi Group a low-price advantage in the market. Aseebu Ltd is a key supplier of inputs to companies in the cooking oil industry. The financial statements of the two companies are shown below:

Income Statement for the past Five Years (Amanfi Ltd)

Year (Million GH¢) 2018 2019 2020 2021 2022 (current year)
Sales 3,720 4,092 4,500 4,950 5,442
Cost of Sales (1,674) (1,841) (2,025) (2,228) (2,449)
Operating Profit 2,046 2,251 2,475 2,722 2,993
Finance Cost (252) (278) (305) (336) (369)
Earnings Before Tax 1,794 1,973 2,170 2,386 2,624
Tax @ 30% (538) (592) (651) (716) (787)
Earnings After Tax 1,256 1,381 1,519 1,670 1,837

Income Statement for the past Five Years (Aseebu Ltd)

Year (Million GH¢) 2018 2019 2020 2021 2022 (current year)
Sales 1,860 2,046 2,250 2,475 2,496
Cost of Sales (837) (921) (1,013) (1,114) (1,123)
Operating Profit 1,023 1,125 1,237 1,361 1,373
Finance Cost (126) (139) (153) (168) (169)
Earnings Before Tax 897 986 1,084 1,193 1,204
Tax @ 30% (269) (296) (325) (358) (361)
Earnings After Tax 628 690 759 835 843

Additional Information:
Amanfi Ltd and Aseebu Ltd have beta of 1.6 and 1.1 respectively. The government treasury bill rate pays a yield of 8% and risk premium on the market is 17%. If the merger goes through, the combined company’s earnings after tax will grow at the same rate as Amanfi Ltd. The merger will lead to annual cost savings of GH¢850 million in perpetuity.

Required:
a) As a Finance Manager, calculate the value of the combined business based on the present value of expected earnings. (8 marks)
b) What is the maximum amount that Amanfi Ltd should pay for Aseebu Ltd? (4 marks)
c) What is the minimum bid that Aseebu Ltd shareholders should be prepared to accept? (4 marks)
d) Calculate the gain/loss from the merger. (2 marks)
e) Identify and explain the type of merger between Amanfi Ltd and Aseebu Ltd. (2 marks)

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