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Question 24

Which of the following is NOT a financial risk.

Options:

Selling goods on credit terms.

Taking out variable rate loans to finance short term investments.

Sourcing raw materials overseas to manufacture goods.

Global warming.

Question 25

The interest rate on EUR deposits is 7%. The interest rate on GBP deposits is 5%. The spot rate is EUR/GBP0.8500. What is the one year forward rate predicted to be assuming interest rate parity holds true?

Options:

0.8662

0.8341

0.7500

0.9633

Question 26

M built a large factory last year and it has just been completed. The initial outflows on this project have a present value of $400 million and the entire project has a net present value of $30 million.

The initial phase of the project caused problems and there was an overspend of $35 million as there was unstable soil. The foundations had to be underpinned with large steel bars to ensure the building would be safe. There was no other suitable site for the project.

The construction could not be abandoned as the site would have had very little commercial value.

The Internal Audit department has been asked to carry out a post completion audit. What issues should it concentrate on?

Options:

The audit should consider the initial survey report when the land was purchased to see if the survey mentioned the unstable soil.

The audit should look at documentation to ensure proper procedures were followed at all stages of the project.

The audit should consider what lessons could be learned for future projects.

The audit should find out who was to blame for the project being over budget.

The audit should consider whether it should have built the factory without underpinning and sold it on quickly.

Question 27

T has its computer facilities in a building adjacent to its headquarters Severe structural problems have been discovered with this building and T has been advised that the only option is demolition and rebuild This leaves T with strategic decisions to make about its IT provision and it has decided to investigate the outsourcing of its services.

Which TWO of the following factors should T consider as most important at this stage?