Template (A) Rev.

1: March 2008

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INSTRUCTIONS TO CANDIDATES:

1. This Question Booklet consists of TWO (2) Sections, Section A and B.

2. Answer ALL Questions in Section A and TWO (2) Questions in Section B.
3. Answer ALL questions in Section A in the OMR Sheet and Section B in the Answer Booklet.
4. Candidates are allowed to bring into the examination hall/room FOUR worksheet comprising of
the summary of the 10 years figures of a company that they are working on their project paper –
Income statement summary, Balance Sheet summary, Cash Flow summary and the Ratio
analysis summary. Students must show these Excel spread sheet to the invigilator while entering
the examination hall.
5. Students who are caught breaching the Examination Rules and Regulation will be charged with
an academic dishonesty, and if found guilty of the offence, the maximum penalty is expulsion from
the University.

(This Question Paper consists of __ Printed Pages including front page)

Question 1 ( 25 marks ) ( 45 minutes )

a. The following is the summary of the financial statements of TENAGA NASIONAL

BERHAD :

CONSOLIDATED STATEMENTS OF 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
INCOME

Net sales 12,108 13,719.1 14,333.5 15,375.1 16,457.8 17,712.1 18,977.5 20,384.2 23,320.4 25,750.6

Cost of sales 9,734 11,297 11,919.8 13,108.7 13,864.8 14,723.4 16,215.9 16,916.9 18,371.4 22,503.4

Gross profit 2,375 -11,297 0 0 16,458 17,712 0 0 0 0

Other Operating Income

other operating
224.8 481.7 2,792.4 271.0 269.7 336.5 374.1 489.3 593.7 794.8
income

Research and
development 0 0 0 0 0 0 0 0 0 0
expenses
Total operating
225 482 2,792 271 270 337 374 489 594 795
expenses

*** DO NOT OPEN THE QUESTION PAPER UNTIL YOU ARE TOLD TO DO SO ***
 Operating profit
2,150 -11,779 -2,792 -271 16,188 17,376 -374 -489 -594 -795
(Revenue)

operting profit

operating profit 5,198.6 6,139.2 3,338.9 2,461.1 2,846.1 2,753.4 3,277.5 4,281.5 6,028.5 4,076.1
Finance cost (notes
978 1,524 2,193 1,477 1,648 1,483 1,819 2,757 4,766 3,025
10)
Other: Share of
results of 98 107 125 143 102.4 79.8 91.0 14.6 42.4 44.9
associates

Total other income 6,275 7,770 5,657 4,081 4,597 4,316 1,910 7,053 10,837 7,146

Profit Before Taxation and minority

1,523.8 1,523.8 2,193.0 1,476.8 1648.5 1482.7 1,818.9 2,756.8 4765.9 3025.2
interest

Taxation (notes
236.6 230.5 124 91 584 675 483 595.1 698.30 424.8
9&11)
Profit After Tax 1,760 1,293 2,069 1,386 1,065 808 1,336 2,162 4,068 2,600

Minority Interests 32 39.5 34.8 14.9 -3 6 -43 35 7 6

Profit for the

financial year (net 1,728 1,254 2,035 1,371 1,067 801 1,379 2,127 4,061 2,594
income)

CONSOLIDATED BALANCE Million

SHEETS

ASSETS 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Current assets:
Property
0 0 0 0 0 0 0 0 0 0
development costs

Inventories 1,114.6 1001.0 982.4 1,216.2 1552.0 1,569.2 1,741.6 1,931.8 1,895 3,039

Trade and other

2,154.7 2,500.9 3,293.4 2,772.2 2,989.3 3,503.6 3,563.2 3,415.4 2,921.8 3,452.2
receivables

Amounts due from

13 21 4 5 77 74 7 44 45 46
associates

Tax recoverable 0 0 0 0 8 26 102 12 10 14

Short term
0 0 0 0 1355.2 360.2 12.6 12.6 12.6 12.6
investment
Marketable
61.4 59.5 47.7 10.7 11.7 10.3 9.4 9.2 10.6 8.5
securities

Deposits with
0 0 0 0 0 0 0 0 0 0
financial institutions

Cash and bank

971.6 768.3 870.3 1,154.0 1,434.9 3,849.8 3,949.7 3,949.7 5,299.3 5,383.9
balances
Total current
3,715 4,351 5,198 5,158 7,429 9,393 9,386 9,374 10,194 11,957
assets
Non-current
assets:
Property, plant and
42,988.3 45,709.6 48,270.3 50,710.7 51,768.4 53,443.7 54,721.0 54,344.5 56,405.3 57,475.3
equipment

*** DO NOT OPEN THE QUESTION PAPER UNTIL YOU ARE TOLD TO DO SO ***
 Prepaid lease
0 0 0 0 0 0 0 856.8 852.6 844.1
payments

Coal mining rights 0 0 0 0 0 312.2 290.7 279.9 0

Subsidaries 0 0 0 0 0 0 0

Associates 457.2 582.0 725.8 806.9 601.4 132.1 158.7 200.6 233.0 322.5

Investments 404.6 402.4 391.0 390.1 158.1 100.5 39.7 38.0 38.0 38.0

Long term
444.0 444.0 0 0 0 0 0 0 0
receiveables

Deffered tax assets 0 0 0 0 0 0 0 0 0 0

Total non-current
44,294 47,138 49,387 51,908 52,528 53,989 55,210 55,720 57,529 26,955
assets

Total assets 48,009 51,489.0 54,585 57,065.7 59,957.0 63,382 64,596 65,094 67,723 58,680

EQUITY AND
LIABILITIES

Current liabilities:
Trade and other
3,360.6 3,211.5 3,433.5 3,478.2 3137.8 3,000.7 3,418.7 3,733.5 4,301.6 5,187.4
payables
Short term
2,298.2 5,371.6 0 0 0 0 2,979.6 2,534.7 2,015.5 1,058.3
borrowings

Bank overdrafts 0 0 2.1 6.4 4.5 1.6 0 0 0 0

Amounts payable to
310.0 353.2 356.2 364.6 216.8 304.9 212.4 212.4 226.1 346.8
related companies

Taxation 136.0 325.4 390.0 306.4 235.3 262.8 214.3 184.6 226.1 69.4

Others 111.6 156.6 3,211.7 2,446.8 4,504.2 1,859.4 0 0 0 0

Total current
6,105 9,418 7,394 6,602 8,099 5,429 6,825 6,665 6,769 6661.9
liabilities

Non-current liabilities:

Long term
23,957.2 22,289.9 25,101.8 26,963.6 26,404.4 30,626.2 27,008.8 24,580.9 21,963.9 21,682.1
borrowings

Consumer deposits 1,104.7 1,224.5 1,324.9 1,455.0 1,598.0 1,766.5 1,952.3 2,147.1 2,319.6 2,551.9

Other liabilities 453 507 563 585 2,116 79 2,328 2,386 2,877 3,384

Total non-current
25,515 22,290 26,990 29,003 30,118 32,472 31,289 29,114 27,160 27617.7
liabilities

Total liabilities 31,619 31,708 34,383 35,606 38,217 37,901 38,114 35,780 33,929 34,280

Equity
attributable to
equity holders of
the company:
Share capital 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000

Reserves 1,604,850 2,090,267 1,624,069 1,603,452 1,247,640 685,296 546,212 425,679 464,706 381,073

Retained earnings 0 0 0 0 0 0 0 0 0 0

*** DO NOT OPEN THE QUESTION PAPER UNTIL YOU ARE TOLD TO DO SO ***
Total to equity holders of the company 1,904,850 2,390,267 1,924,069 1,903,452 1,547,640 985,296 846,212 725,679 764,706 681,073

Minority interests 0 0 0 0 0 0 0 0 0 0

Total equity 1,904,850 2,390,267 1,924,069 1,903,452 1,547,640 985,296 846,212 725,679 764,706 681,073
Total liabilities and equity 1,936,469 2,421,975 1,958,452 1,939,058 1,585,857 1,023,197 884,326 761,459 798,635 715,353

FISCAL YEARS 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Invested Book Capital 44,537 48,121 47,940 51,141 52,315 58,521 61,177 61,360 63,421 53,493
Invested Capital 44,537 48,121 47,940 51,141 52,315 58,521 61,177 61,360 63,421 53,493

Total Equity/ Total Assets 3968% 4642% 3525% 3336% 2581% 1555% 1310% 1115% 1129% 1161%

Debt to total assets ratio 55.4% 45.7% 51.9% 53.4% 52.9% 54.0% 51.5% 48.0% 43.5% 51.4%

Capital cost rate 518% 606% 461% 436% 338% 205% 173% 147% 149% 153%

Economic value added(EVA) (229,382) (289,939) (218,679) (221,590) (175,229) (118,301) (103,878) (87,585) (89,657) (79,007)

 
10 YEAR FINANCIAL SUMMARY 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Net sales 12,108 13,719.1 14,333.5 15,375.1 16,457.8 17,712.1 18,977.5 20,384.2 23,320.4 25,750.6
Net income 1,728 1,254 2,035 1,371 1,067 801 1,379 2,127 4,061 2,594
Gross profit to net sales ratio 20% 18% 17% 15% 16% 17% 15% 17% 21% 13%
R&D expense to net sales ratio 12.30% 68.96% 7.81% 8.29% 12.63% 12.80% 10.18% 10.43% 6.67% 5.37%
Operating profit to net sales ratio 18% 14% -3% 13% 14% 15% 13% 15% 19% 10%
Inventory turnover within "days" 10.86 13.71 14.59 12.64 10.6 11.29 10.9 10.55 12.31 8.47
Debt to total assets ratio 102% 101% 102% 102% 102% 104% 105% 105% 104% 105%
Stockholders' equity to total assets ratio 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% 0.20% 0.30% 0.50% 0.40%
Residual Value 3,123 3,159 3,561 3,521 57,719 61,613 4,225 7,737 8,558 10,320

Gross profit 19.61% 17.65% 16.84% 14.74% 15.76% 16.87% 14.55% 17.01% 21.22% 12.61%

X1 (Net Working Capital/Total Assets) -0.01 -0.01 0 0 0 0.01 0 0 0.01 0.01

X2(Retained Earnings/Total Assets) 4.68 5.68 4.17 3.93 2.91 1.51 1.18 0.92 0.96 0.91

X3(EBIT/Total Assets) 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.02 0.02

X4(Market Value of Equity/Book Value of 36.15 45.23 33.58 32.08 24.3 15.6 13.32 12.17 13.52 11.92
Total Liabilities
X5(Sales/Total Assets) 0.25 0 0 0 0.27 0.28 0 0 0 0

a. From the information above determine :

i. The Return on Equity ( ROE) of the group for the year ended 2008 ?
( 2 marks )
ii. Compare the performance of the company and the source of the different in
the performance between 2008 and 2007 using Du-pont De-composition of
ratios.
(10 marks )
Iii. What was the Earning per share (EPS) and Price Earning Ratio (PER) of
the company for the last two years. Were they reasonable ?
( 3 marks )

b. By referring to the Balance Sheet of the company that you studied :

*** DO NOT OPEN THE QUESTION PAPER UNTIL YOU ARE TOLD TO DO SO ***
 I.What is the value of the company today based on the Net Assets Value (NAV) in
the Balance Sheet ?.
( 2 marks )
ii. Examining the list of assets in the company, what should be the NAV of the
company based on the current market value ?
( 5 marks )

iii. Do you think the share price of the company reflect the NAV of the company ?
(3 marks )

Question 2 - (25 marks ) ( 45 minutes )

The board of Directors had set up a new performance target of pushing the shares
price by 30% by the end of 2010. Determine :

i. What should be the targeted profit after tax for the year ended 2010 ?
( 3 marks)
ii. What should be the targeted Return on Equity of the company for 2010 ?
(2 marks )
iii. What should be the targeted Revenue of the company for 2010 ?
( 3 marks )
iv. How could the company increase revenue to meet the targeted profit and
share price ?
( 12 marks )
v. What are other possibilities of achieving the targeted profit and share price
increased – the constraint and opportunity ?
( 5 marks )

Question 3 ( 25 marks ) ( 45 minutes )

You have been provided with a projected Income statements of Mc Grandy Bhd for
the next 5 years. The projected profit for the next five years have been converted
into NOPLAT ( Net Operating Profit less Adjusted Tax ) as follows:

5 years horizon 1 2 3 4 5

NOPLAT 119,250 235, 476 267,890 312,450 362,415

The management had decided on the following assumption for the next 5 years :
 Return on Investment (RONIC) at 15%
 Growth rate (g) at 8%
 Weighted average of Capital ( WACC) at 11%

Projected Depreciation and Gross Investment is as follows :

5 years horizon 1 2 3 4 5

Depreciation 17,456 24,765 27,654 33,421 39,345

*** DO NOT OPEN THE QUESTION PAPER UNTIL YOU ARE TOLD TO DO SO ***
 Gross Investment 89,350 127,580 148,450 186,440 211,350
Capital Investment 71,894 102,815 120,796 153,019 172,005
Net investment 71,894 30,921 17,981 32,223 18,986

Required :

a. Calculate Free Cash Flow (FCF) of the company for the next 5 years.
( 5 marks )

b. Calculate the Present Value of Cash flow of the company for the next 5 years.
( 5 marks )
c. Calculate the Present Value of Continuing Value
( 8 marks )
d. Calculate the Total Value of the company based on the five years projection.
( 4 marks )
e. What is the strength and weaknesses of the valuation method ?
( 3 marks )

Question 4 - ( 25 marks ) ( 45 minutes )

GEMPAR Berhad had the following Return on Invested Capital for the last 3 years –
2006, 2007 and 2008 and 3 projected Return on Invested Capital (ROIC) for 2009, 2010
and 2011.

2006 2007 2008 2009 2010 2011

ROIC 14.5 15.6 18.9 16.9 17.2 17.9

NOPLAT 62,436 77,865
Increm return 15,429
The weighted Average cost of Capital (WACC) for the six years – the past and projection –
were as follows :

2006 2007 2008 2009 2010 2011

WACC 9.8 9.0 8.6 9.1 9.2 9.2

The Invested capital of the company for the six years is as follows :

2006 2007 2008 2009 2010 2011

*** DO NOT OPEN THE QUESTION PAPER UNTIL YOU ARE TOLD TO DO SO ***
Invested Capital 210,500 235,000 285,000 345,000 363,000 435,000
72,000
Required :
a. Determine the Economic spread of the company
( 2 marks )
b. Determine Economic Profit of the company
( 6 marks )
c. Determine the Present value of the Economic profit
( 10 marks )
d. Determine the value of the company based on this economic profit assuming that the
company is expected to have an average growth rate of 4.5% in the 6 relevant years:
( 7 marks )

*** DO NOT OPEN THE QUESTION PAPER UNTIL YOU ARE TOLD TO DO SO ***