Accounting 9706 · AS & A Level · Investment appraisal

Investment appraisal — practice question

Consult Source C in the insert.
(a(i))[1]

Using two decimal places, calculate the dividend per share in 2024.

(a(ii))[1]

Calculate, to two decimal places, the dividend cover in 2024.

(a(iii))[2]

Calculate, to two decimal places, the gearing at 31 December 2024.

(b)[2]

Calculate the expected annual profit from operations if the investment in new non-current assets takes place.

(c)[14]

Calculate, to two decimal places, the dividend cover in 2025 and the gearing ratio at 31 December 2025 for each option.

(d)[5]

Assess whether the directors were right to choose Option 1. Justify your answer.

Worked solution & mark scheme

This 25-mark question has a full step-by-step worked solution and mark scheme. One marking point: 12 000 / 200 000 = $0.06 per share

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