cima paper

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CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper P3Published November 2009

The Chartered Institute of Management Accountants 2009

P3

PerformanceStra

tegy

Pillar P

P3 Performance Strategy

Specimen Examination Paper

Instructions to candidates

You are allowed three hours to answer this question paper.

You are allowed 20 minutes reading time before the examination beginsduring which you should read the question paper and, if you wish, highlightand/or make notes on the question paper. However, you will not be allowed,under any circumstances, to open the answer book and start writing or useyour calculator during this reading time.

You are strongly advised to carefully read ALL the question requirementsbefore attempting the question concerned (that is, all parts and/or sub-questions). The requirements for all questions are contained in a dotted box.

ALL answers must be written in the answer book. Answers or notes writtenon the question paper will not be submitted for marking.

Answer ALL compulsory questions in Section A on page 8.

Answer TWO of the three questions in Section B on pages 9 to 12.

Maths Tables are provided on pages 13 and 16.

The list of verbs as published in the syllabus is given for reference on page17

Write your candidate number, the paper number and examination subject title

in the spaces provided on the front of the answer book. Also write yourcontact ID and name in the space provided in the right hand margin and sealto close.

Tick the appropriate boxes on the front of the answer book to indicate whichquestions you have answered.

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Specimen Exam Paper 2 Performance Strategy

Power Utilities

Pre-seen Case Study

BackgroundPower Utilities (PU) is located in a democratic Asian country. Just over 12 months ago, theformer nationalised Electricity Generating Corporation (EGC) was privatised and became PU.EGC was established as a nationalised industry many years ago. Its home government at thattime had determined that the provision of the utility services of electricity generationproduction should be managed by boards that were accountable directly to Government. Intheory, nationalised industries should be run efficiently, on behalf of the public, without theneed to provide any form of risk related return to the funding providers. In other words, EGC,along with other nationalised industries was a non-profit making organisation. This, theGovernment claimed at the time, would enable prices charged to the final consumer to bekept low.

Privatisation of EGCThe Prime Minister first announced three years ago that the Government intended to pursuethe privatisation of the nationalised industries within the country. The first priority was to bethe privatisation of the power generating utilities and EGC was selected as the first

nationalised industry to be privatised. The main purpose of this strategy was to encouragepublic subscription for share capital. In addition, the Governments intention was that PUshould take a full and active part in commercial activities such as raising capital and earninghigher revenue by increasing its share of the power generation and supply market byachieving growth either organically or through making acquisitions. This, of course, alsomeant that PU was exposed to commercial pressures itself, including satisfying therequirements of shareholders and becoming a potential target for take-over. The majorshareholder, with a 51% share, would be the Government. However, the Minister of Energyhas recently stated that the Government intends to reduce its shareholding in PU over timeafter the privatisation takes place.

Industry structurePU operates 12 coal-fired power stations across the country and transmits electricity through

an integrated national grid system which it manages and controls. It is organised into threeregions, Northern, Eastern and Western. Each region generates electricity which is sold to 10private sector electricity distribution companies which are PUs customers.

The three PU regions transmit the electricity they generate into the national grid system. Ashortage of electricity generation in one region can be made up by taking from the nationalgrid. This is particularly important when there is a national emergency, such as exceptionalweather conditions.

The nationalised utility industries, including the former EGC, were set up in a monopolisticposition. As such, no other providers of these particular services were permitted to enter themarket within the country. Therefore, when EGC was privatised and became PU it remainedthe sole generator of electricity in the country. The electricity generating facilities, in the formof the 12 coal-fired power stations, were all built over 15 years ago and some date back to

before EGC came into being.The 10 private sector distribution companies are the suppliers of electricity to final usersincluding households and industry within the country, and are not under the management orcontrol of PU. They are completely independent companies owned by shareholders.

The 10 private sector distribution companies serve a variety of users of electricity. Some,such as AB, mainly serve domestic users whereas others, such as DP, only supply electricityto a few industrial clients. In fact, DP has a limited portfolio of industrial customers and 3major clients, an industrial conglomerate, a local administrative authority and a supermarketchain. DP finds these clients costly to service.

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Performance Strategy 3 Specimen Exam Paper

Structure of PUThe structure of PU is that it has a Board of Directors headed by an independent Chairmanand a separate Managing Director. The Chairman of PU was nominated by the Governmentat the time the announcement that EGC was to be privatised was made. His background isthat he is a former Chairman of an industrial conglomerate within the country. There was noprevious Chairman of EGC which was managed by a Management Board, headed by the

Managing Director. The former EGC Managing Director retired on privatisation and a newManaging Director was appointed.

The structure of PU comprises a hierarchy of many levels of management authority. Inaddition to the Chairman and Managing Director, the Board consists of the Directors of eachof the Northern, Eastern and Western regions, a Technical Director, the Company Secretaryand the Finance Director. All of these except the Chairman are the Executive Directors of PU.The Government also appointed seven Non Executive Directors to PUs Board. With theexception of the Company Secretary and Finance Director, all the Executive Directors arequalified electrical engineers. The Chairman and Managing Director of PU have worked hardto overcome some of the inertia which was an attitude that some staff had developed withinthe former EGC. PU is now operating efficiently as a private sector company. There havebeen many staff changes at a middle management level within the organisation.

Within the structure of PUs headquarters, there are five support functions; engineering,finance (which includes PUs Internal Audit department), corporate treasury, human resourcemanagement (HRM) and administration, each with its own chief officers, apart from HRM.Two Senior HRM Officers and Chief Administrative Officer report to the Company Secretary.The Chief Accountant and Corporate Treasurer each report to the Finance Director. Thesefunctions, except Internal Audit, are replicated in each region, each with its own regionalofficers and support staff. Internal Audit is an organisation wide function and is based at PUheadquarters.

Regional Directors of EGCThe Regional Directors all studied in the field of electrical engineering at the country's leadinguniversity and have worked together for a long time. Although they did not all attend theuniversity at the same time, they have a strong belief in the quality of their education. After

graduation from university, each of the Regional Directors started work at EGC in a juniorcapacity and then subsequently gained professional electrical engineering qualifications. Theybelieve that the experience of working up through the ranks of EGC has enabled them tohave a clear understanding of EGCs culture and the technical aspects of the industry as awhole. Each of the Regional Managers has recognised the changed environment that PU nowoperates within, compared with the former EGC, and they are now working hard to help PUachieve success as a private sector electricity generator. The Regional Directors are wellregarded by both the Chairman and Managing Director, both in terms of their technical skilland managerial competence.

Governance of EGCPreviously, the Managing Director of the Management Board of EGC reported to senior civilservants in the Ministry of Energy. There were no shareholders and ownership of theCorporation rested entirely with the Government. That has now changed. The Government

holds 51% of the shares in PU and the Board of Directors is responsible to the shareholdersbut, inevitably, the Chairman has close links directly with the Minister of Energy, whorepresents the major shareholder.

The Board meetings are held regularly, normally weekly, and are properly conducted with fullminutes being taken. In addition, there is a Remuneration Committee, an Audit Committeeand an Appointments Committee, all in accordance with best practice. The model which hasbeen used is the Combined Code on Corporate Governance which applies to companieswhich have full listing status on the London Stock Exchange. Although PU is not listed on theLondon Stock Exchange, the principles of the Combined Code were considered by theGovernment to be appropriate to be applied with regard to the corporate governance of the

company.

Currently, PU does not have an effective Executive Information System and this has recentlybeen raised at a Board meeting by one of the non-executive directors because he believes

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this inhibits the function of the Board and consequently is disadvantageous to the governanceof PU.

Remuneration of Executive DirectorsIn order to provide a financial incentive, the Remuneration Committee of PU has agreed thatthe Executive Directors be entitled to performance related pay, based on a bonus scheme, inaddition to their fixed salary and health benefits.

Capital marketPU exists in a country which has a well developed capital market relating both to equity andloan stock funding. There are well established international institutions which are able toprovide funds and corporate entities are free to issue their own loan stock in accordance withinternationally recognised principles. PU is listed on the countrys main stock exchange.

Strategic opportunityThe Board of PU is considering the possibility of vertical integration into electricity supply andhas begun preliminary discussion with DPs Chairman with a view to making an offer for DP.PUs Board is attracted by DPs strong reputation for customer service but is aware, throughpress comment, that DP has received an increase in complaints regarding its service tocustomers over the last year. When the former EGC was a nationalised business, break-downs were categorised by the Government as urgent, when there was a danger to life, andnon-urgent which was all others. Both the former EGC and DP had a very high success ratein meeting the governments requirements that a service engineer should attend the urgentbreak-down within 60 minutes. DPs record over this last year in attending urgent break-downs has deteriorated seriously and if PU takes DP over, this situation would need toimprove.

Energy consumption within the country and Government drive for increased efficiencyand concern for the environmentEnergy consumption has doubled in the country over the last 10 years. As PU continues touse coal-fired power stations, it now consumes most of the coal mined within the country.

The Minister of Energy has indicated to the Chairman of PU that the Government wishes toencourage more efficient methods of energy production. This includes the need to reduce

production costs. The Government has limited resources for capital investment in energyproduction and wishes to be sure that future energy production facilities are more efficient andeffective than at present.

The Minister of Energy has also expressed the Governments wish to see a reduction inharmful emissions from the countrys power stations. (The term harmful emissions in thiscontext, refers to pollution coming out of electricity generating power stations which damagethe environment.)

One of PUs non-executive directors is aware that another Asian country is a market leader incoal gasification which is a fuel technology that could be used to replace coal for powergeneration. In the coal gasification process, coal is mixed with oxygen and water vapourunder pressure, normally underground, and then pumped to the surface where the gas can beused in power stations. The process significantly reduces carbon dioxide emissions although

it is not widely used at present and not on any significant commercial scale.Another alternative to coal fired power stations being actively considered by PUs Board is theconstruction of a dam to generate hydro-electric power. The Board is mindful of the likelyadverse response of the public living and working in the area where the dam would be built.

In response to the Governments wishes, PU has established environmental objectivesrelating to improved efficiency in energy production and reducing harmful emissions such asgreenhouse gases. PU has also established an ethical code. Included within the code aresections relating to recycling and reduction in harmful emissions as well as to terms andconditions of employment.

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Introduction of commercial accounting practices at EGCThe first financial statements have been produced for PU for 2008. Extracts from theStatement of Financial Position from this are shown in Appendix A. Within these financialstatements, some of EGC's loans were "notionally" converted by the Government intoordinary shares. Interest is payable on the Government loans as shown in the statement offinancial position. Reserves is a sum which was vested in EGC when it was first nationalised.

This represents the initial capital stock valued on a historical cost basis from the formerelectricity generating organisations which became consolidated into EGC when it was firstnationalised.

Being previously a nationalised industry and effectively this being the first "commerciallybased" financial statements, there are no retained earnings brought forward into 2008.

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APPENDIX A

EXTRACTS FROM THE PRO FORMA FINANCIAL STATEMENTS OF THE ELECTRICITYGENERATING CORPORATION

Statement of financial position as at 31 December 2008P$ million

ASSETSNon-current assets 15,837Current assetsInventories 1,529Receivables 2,679Cash and Cash equivalents 133

4,341Total assets 20,178EQUITY AND LIABILITIESEquityShare capital 5,525Reserves 1,231Total equity 6,756

Non-current liabilitiesGovernment loans 9,560Current liabilitiesPayables 3,862Total liabilities 13,422Total equity and liabilities 20,178

End of Pre-seen Material

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extraction filters fitted to the power station. Although PUs head office was aware of theproblem, funds were not made available to rectify this. The matter was reported by the headof internal audit to the Managing Director with the recommendation that the emissionsinformation was amended to show actual emissions.

Required:

Working as a consultant to the board of PU:

(a) The board of PU needs to assess methods of power generation inpreparation for replacing the existing coal fired power stations. Advise theboard how to develop an Information strategy to support this objective.

(12 marks)

(b) Evaluate the financial and other risks affecting PU if a subsidiary isestablished in Zee to manufacture coal gasification equipment.

(16 marks)

(c)

(i) PUs internal audit department may be asked to participate in the environmentalaudit of PU.

Explain the term environmental audit and evaluate the attributes that PUsinternal audit department should have prior to carrying out this work.

(8 marks)

(ii) There is a discrepancy in environmental returns from power station N3.Recommend the actions (apart from reporting to the Managing Director)that the internal audit department of PU should undertake regarding thissituation.

(8 marks)

(d) Discuss the extent to which false reporting of environmental information isa source of risk to PU and explain control mechanisms that may be usedto avoid false reporting.

(6 marks)

(Total for question One = 50 marks)

End of Section ASection B starts on page 9

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SECTION B

[The indicative time for answering this section is 90 minutes]

ANSWER TWOOF THE THREE QUESTIONS 25 MARKS EACH.

Question Two

The Y company produces a range of dairy products such as yoghurts, cream and butter fromone factory. The main ingredient for these products is milk, which is obtained from 27different dairy farms (fields where cows are allowed to graze and produce milk) within a 60 kmradius of the factory. Y requires that milk must be delivered within 6 hours of being obtainedfrom the cows and that the farms themselves use organic principles (farming without usingmanmade pesticides, growth hormones etc.). Transportation systems in Ys country are goodand milk is rarely delivered late.

Each farm provides a quality certificate on each batch of milk produced confirming adherenceto these standards (this is important to Y although customer satisfaction surveys show Yproducts are sold on taste, not sourcing of ingredients).

In Ys factory, yoghurt is produced in batches. The inputs to each batch such as milk, fruit,appropriatebacteria and other ingredients, are recorded in the batch database showing thesource of that ingredient, that is the specific farm. During production, Ys quality controldepartment tests each batch for purity (lack of contamination from harmfulbacteria etc) andacceptable taste, with the results being recorded in the quality control database. Any batchesnot meeting quality standards are rejected and destroyed. Ys costing systems havemaintained a 5% failure rate in production for the last 6 years which is now well in excess ofthe industry average.

On completion of each batch, the quality control department again undertakes purity controland taste testing. Batches are rejected where standards are not met; a further 2% failure rateis expected at this stage.

Batches of yoghurt etc are packed on Ys premises and then despatched for sale via retailoutlets such as supermarkets; Y does not sell direct to the consumer. However, Y has anexcellent brand name resulting from innovative advertising and high product quality. Productreviews in magazines and news websites have always been favourable meaning that Y doesnot need to pay much, if any, attention to customer feedback.

Required

(a) Evaluate the control systems in Y for the manufacture of yoghurt,recommending improvements to those systems where necessary.

(12 marks)

(b) Explain the process of risk mapping and construct a risk map for Y. Discusshow risk mapping can be used within the Y organisation.

(13 marks)

(Total for Question Two = 25 marks)

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Question Three

A is a small company based in England. The company had the choice of launching a newproduct in either England or France but lack of funding meant that it could not do both. Thecompany bases its decisions on Expected Net Present Value (ENPV) and current exchangerates. As a result of this methodology, and the details shown below, it was decided to launchin England (with an ENPV of 28,392) and not France (with an ENPV of 25,560).

England France

Probability Probability

Launch Costs Launch Costs

145,000 01 190,000 10

120,000 09

Annual Cash Flows Annual Cash Flows

65,000 04 90,000 05

42,000 04 70,000 02

24,000 02 30,000 03

Required:

(a) Discuss the risks associated with each launch option. Advise how these risks may bemanaged by the company.

(12 marks)

(b) Company A wishes to raise 3 year 500,000 floating rate finance to fund the productlaunch and additional capital investments. Company A has a choice between:

Alternative A: floating rate finance at LIBOR + 12% or

Alternative B: fixed rate finance at 94%, together with an interest rate swap at afixed annual rate of 85% against LIBOR with a swap arrangement fee of 05% flatpayable up front

Required:

(i) Discuss the potential benefits and hazards of interest rate swaps as a toolfor managing interest rate risk.

(8 marks)

(ii) Ignoring the time value of money, calculate the total difference in costbetween the two alternative sources of finance available to Company A.

(5 marks)

(Total for part (b) = 13 marks)(Total for question Three = 25 marks)

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Question Four

X is an organisation involved in making business-to-business sales of industrial products. Xemploys a sales team of 40 representatives and assigns each a geographic territory that isquite large. Sales representatives search for new business and follow up sales leads to winnew business, and maintain contact with the existing customer base.

The sales representatives spend almost all their time travelling to visit clients. The only timewhen they are not doing this is on one day each month when they are required to attend theirregional offices for a sales meeting. Sales representatives incur expenses. They have amobile telephone, a fully maintained company car and a corporate credit card which can beused to pay for vehicle expenses, accommodation and meals and the cost of entertainingpotential and existing clients.

The performance appraisal system for each sales representative is based on the number andvalue of new clients and existing clients in their territory. All sales representatives are requiredto submit a weekly report to their regional managers which gives details of the new andexisting clients that they have visited during that week. The regional managers do not getinvolved in the daily routines of sales representatives if they are generating sufficient sales.

Consequently, sales representatives have a large amount of freedom.

The Head Office Finance department, to whom regional managers have a reportingrelationship, analyses the volume and value of business won by sales representatives andcollects details of their expenses which are then reported back monthly to regional managers.At the last meeting of regional managers, the Head Office Finance department highlighted theincrease in sales representatives expenses as a proportion of sales revenue over the last twoyears and instructed regional managers to improve their control over the work representativescarry out and the expenses they incur.

End of Question Paper

Required:

(a) Explain what an internal control system is, how it relates to the controlenvironment and its likely costs, benefits and limitations.

(8 marks)

(b) Discuss the purposes and importance of internal control and risk managementto the X company and recommend action that should be taken to overcome anyperceived weaknesses identified in internal control and/or risk managementsystems.

(12 marks)

(c) Recommend how substantive analytical procedures could be used in theinternal audit of Xs sales representatives expenses.

(5 marks)

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MATHS TABLES AND FORMULAE

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Present value table

Present value of $1, that is nr 1 where r= interest rate; n= number of periods untilpayment or receipt.

Periods

(n)

Interest rates (r)

1% 2% 3% 4% 5% 6% 7% 8% 9% 10%1 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.9092 0.980 0.961 0.943 0.925 0.907 0.890 0.873 0.857 0.842 0.8263 0.971 0.942 0.915 0.889 0.864 0.840 0.816 0.794 0.772 0.7514 0.961 0.924 0.888 0.855 0.823 0.792 0.763 0.735 0.708 0.6835 0.951 0.906 0.863 0.822 0.784 0.747 0.713 0.681 0.650 0.6216 0.942 0.888 0.837 0.790 0.746 0.705 0.666 0.630 0.596 0.5647 0.933 0.871 0.813 0.760 0.711 0.665 0.623 0.583 0.547 0.5138 0.923 0.853 0.789 0.731 0.677 0.627 0.582 0.540 0.502 0.4679 0.914 0.837 0.766 0.703 0.645 0.592 0.544 0.500 0.460 0.424

10 0.905 0.820 0.744 0.676 0.614 0.558 0.508 0.463 0.422 0.38611 0.896 0.804 0.722 0.650 0.585 0.527 0.475 0.429 0.388 0.35012 0.887 0.788 0.701 0.625 0.557 0.497 0.444 0.397 0.356 0.31913 0.879 0.773 0.681 0.601 0.530 0.469 0.415 0.368 0.326 0.29014 0.870 0.758 0.661 0.577 0.505 0.442 0.388 0.340 0.299 0.26315 0.861 0.743 0.642 0.555 0.481 0.417 0.362 0.315 0.275 0.239

16 0.853 0.728 0.623 0.534 0.458 0.394 0.339 0.292 0.252 0.21817 0.844 0.714 0.605 0.513 0.436 0.371 0.317 0.270 0.231 0.19818 0.836 0.700 0.587 0.494 0.416 0.350 0.296 0.250 0.212 0.18019 0.828 0.686 0.570 0.475 0.396 0.331 0.277 0.232 0.194 0.16420 0.820 0.673 0.554 0.456 0.377 0.312 0.258 0.215 0.178 0.149

Periods(n)

Interest rates (r)11% 12% 13% 14% 15% 16% 17% 18% 19% 20%

1 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.8332 0.812 0.797 0.783 0.769 0.756 0.743 0.731 0.718 0.706 0.6943 0.731 0.712 0.693 0.675 0.658 0.641 0.624 0.609 0.593 0.5794 0.659 0.636 0.613 0.592 0.572 0.552 0.534 0.516 0.499 0.4825 0.593 0.567 0.543 0.519 0.497 0.476 0.456 0.437 0.419 0.4026 0.535 0.507 0.480 0.456 0.432 0.410 0.390 0.370 0.352 0.3357 0.482 0.452 0.425 0.400 0.376 0.354 0.333 0.314 0.296 0.2798 0.434 0.404 0.376 0.351 0.327 0.305 0.285 0.266 0.249 0.233

9 0.391 0.361 0.333 0.308 0.284 0.263 0.243 0.225 0.209 0.19410 0.352 0.322 0.295 0.270 0.247 0.227 0.208 0.191 0.176 0.16211 0.317 0.287 0.261 0.237 0.215 0.195 0.178 0.162 0.148 0.13512 0.286 0.257 0.231 0.208 0.187 0.168 0.152 0.137 0.124 0.11213 0.258 0.229 0.204 0.182 0.163 0.145 0.130 0.116 0.104 0.09314 0.232 0.205 0.181 0.160 0.141 0.125 0.111 0.099 0.088 0.07815 0.209 0.183 0.160 0.140 0.123 0.108 0.095 0.084 0.079 0.06516 0.188 0.163 0.141 0.123 0.107 0.093 0.081 0.071 0.062 0.05417 0.170 0.146 0.125 0.108 0.093 0.080 0.069 0.060 0.052 0.04518 0.153 0.130 0.111 0.095 0.081 0.069 0.059 0.051 0.044 0.03819 0.138 0.116 0.098 0.083 0.070 0.060 0.051 0.043 0.037 0.03120 0.124 0.104 0.087 0.073 0.061 0.051 0.043 0.037 0.031 0.026

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Cumulative present value of $1 per annum, Receivable or Payable at the end of each year for n

years rr n )(11

Periods(n)

Interest rates (r)1% 2% 3% 4% 5% 6% 7% 8% 9% 10%

1 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909

2 1.970 1.942 1.913 1.886 1.859 1.833 1.808 1.783 1.759 1.7363 2.941 2.884 2.829 2.775 2.723 2.673 2.624 2.577 2.531 2.4874 3.902 3.808 3.717 3.630 3.546 3.465 3.387 3.312 3.240 3.1705 4.853 4.713 4.580 4.452 4.329 4.212 4.100 3.993 3.890 3.791

6 5.795 5.601 5.417 5.242 5.076 4.917 4.767 4.623 4.486 4.3557 6.728 6.472 6.230 6.002 5.786 5.582 5.389 5.206 5.033 4.8688 7.652 7.325 7.020 6.733 6.463 6.210 5.971 5.747 5.535 5.3359 8.566 8.162 7.786 7.435 7.108 6.802 6.515 6.247 5.995 5.759

10 9.471 8.983 8.530 8.111 7.722 7.360 7.024 6.710 6.418 6.145

11 10.368 9.787 9.253 8.760 8.306 7.887 7.499 7.139 6.805 6.49512 11.255 10.575 9.954 9.385 8.863 8.384 7.943 7.536 7.161 6.81413 12.134 11.348 10.635 9.986 9.394 8.853 8.358 7.904 7.487 7.10314 13.004 12.106 11.296 10.563 9.899 9.295 8.745 8.244 7.786 7.36715 13.865 12.849 11.938 11.118 10.380 9.712 9.108 8.559 8.061 7.606

16 14.718 13.578 12.561 11.652 10.838 10.106 9.447 8.851 8.313 7.824

17 15.562 14.292 13.166 12.166 11.274 10.477 9.763 9.122 8.544 8.02218 16.398 14.992 13.754 12.659 11.690 10.828 10.059 9.372 8.756 8.20119 17.226 15.679 14.324 13.134 12.085 11.158 10.336 9.604 8.950 8.36520 18.046 16.351 14.878 13.590 12.462 11.470 10.594 9.818 9.129 8.514

Periods(n)

Interest rates (r)11% 12% 13% 14% 15% 16% 17% 18% 19% 20%

1 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.8332 1.713 1.690 1.668 1.647 1.626 1.605 1.585 1.566 1.547 1.5283 2.444 2.402 2.361 2.322 2.283 2.246 2.210 2.174 2.140 2.1064 3.102 3.037 2.974 2.914 2.855 2.798 2.743 2.690 2.639 2.5895 3.696 3.605 3.517 3.433 3.352 3.274 3.199 3.127 3.058 2.991

6 4.231 4.111 3.998 3.889 3.784 3.685 3.589 3.498 3.410 3.3267 4.712 4.564 4.423 4.288 4.160 4.039 3.922 3.812 3.706 3.6058 5.146 4.968 4.799 4.639 4.487 4.344 4.207 4.078 3.954 3.8379 5.537 5.328 5.132 4.946 4.772 4.607 4.451 4.303 4.163 4.031

10 5.889 5.650 5.426 5.216 5.019 4.833 4.659 4.494 4.339 4.192

11 6.207 5.938 5.687 5.453 5.234 5.029 4.836 4.656 4.486 4.32712 6.492 6.194 5.918 5.660 5.421 5.197 4.988 7.793 4.611 4.43913 6.750 6.424 6.122 5.842 5.583 5.342 5.118 4.910 4.715 4.53314 6.982 6.628 6.302 6.002 5.724 5.468 5.229 5.008 4.802 4.61115 7.191 6.811 6.462 6.142 5.847 5.575 5.324 5.092 4.876 4.675

16 7.379 6.974 6.604 6.265 5.954 5.668 5.405 5.162 4.938 4.73017 7.549 7.120 6.729 6.373 6.047 5.749 5.475 5.222 4.990 4.77518 7.702 7.250 6.840 6.467 6.128 5.818 5.534 5.273 5.033 4.81219 7.839 7.366 6.938 6.550 6.198 5.877 5.584 5.316 5.070 4.84320 7.963 7.469 7.025 6.623 6.259 5.929 5.628 5.353 5.101 4.870

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Formulae

AnnuityPresent value of an annuity of 1 per annum receivable or payable for nyears, commencingin one year, discounted at r% per annum:

PV =

nrr ]1[

11

1

PerpetuityPresent value of 1 per annum, payable or receivable in perpetuity, commencing in one year,discounted at r% per annum:

PV =r

1

Growing PerpetuityPresent value of 1 per annum, receivable or payable, commencing in one year, growing in

perpetuity at a constant rate of g% per annum, discounted at r% per annum:

PV =gr

1

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LIST OF VERBS USED IN THE QUESTION REQUIREMENTS

A list of the learning objectives and verbs that appear in the syllabus and in the question requirements foreach question in this paper.

It is important that you answer the question according to the definition of the verb.

LEARNING OBJECTIVE VERBS USED DEFINITION

Level 1 - KNOWLEDGE

What you are expected to know. List Make a list of

State Express, fully or clearly, the details/facts of

Define Give the exact meaning of

Level 2 - COMPREHENSION

What you are expected to understand. Describe Communicate the key features

Distinguish Highlight the differences between

Explain Make clear or intelligible/State the meaning

or purpose of

Identify Recognise, establish or select after

consideration

Illustrate Use an example to describe or explainsomething

Level 3 - APPLICATION

How you are expected to apply your knowledge. Apply

Calculate/compute

To put to practical use

Ascertain or reckon mathematically

Demonstrate To prove with certainty or to exhibit by

practical means

Prepare Make or get ready for use

Reconcile Make or prove consistent/compatible

Solve Find an answer to

Tabulate Arrange in a table

Level 4 - ANALYSIS

How you are expected to analyse the detail of

what you have learned.

Analyse

Categorise

Examine in detail the structure of

Place into a defined class or division

Compare and contrast Show the similarities and/or differences

between

Construct Build up or compile

Discuss Examine in detail by argument

Interpret Translate into intelligible or familiar terms

Prioritise Place in order of priority or sequence for action

Produce Create or bring into existence

Level 5 - EVALUATION

How you are expected to use your learning to

evaluate, make decisions or recommendations.

Advise

Evaluate

Recommend

Counsel, inform or notify

Appraise or assess the value of

Propose a course of action

8/6/2019 Cima Paper

17/17



Performance Pillar

Strategic Level Paper

P3 Performance Strategy

Specimen Paper

Wednesday Morning Session

cima paper

Documents