Question 2 - Set up

In this lesson

1. 0:00 AFM Practice Exam Question Overview
2. 0:24 Understanding Question Requirements And Marks
3. 1:40 Robson Co Company Background And Context
4. 3:27 Project Financial Information And Financing Structure
5. 4:00 Why Adjusted Present Value Is The Right Method
6. 5:01 Key Parameters: Beta, Rates, And Tax Rate
7. 6:35 Capital Providers And Funding Concerns
8. 7:36 Adjusted Present Value Calculation Framework
9. 8:15 Base Case NPV And Ungeared Cost Of Equity
10. 9:00 Financing Side Effects: Rights Issue And Subsidised Loan
11. 9:42 Bank Loan Repayment And Variable Tax Shield
12. 10:59 Evaluating Capital Provider Approval Factors

About this lesson

The question requires you to evaluate a manufacturing relocation project using the APV method, accounting for multiple financing sources including rights issues, subsidised loans, and bank debt, then analyse the factors that capital providers will consider before approving funding. You'll discover how to structure your time effectively across the two requirements (13 marks for the APV evaluation and 7 marks for the stakeholder analysis), identify the key exhibits and financial data you'll need, and understand why adjusted present value is the appropriate technique when project financing changes the financial risk profile. The session walks through the crucial planning steps: calculating an ungeared cost of equity using the asset beta provided, working through complex financing side effects including tax shields and subsidy benefits, and ensuring your discussion of capital provider concerns focuses specifically on the circumstances presented in the case rather than generic factors.

Duration: 12m