(c) State one advantage to a business of keeping its working capital cycle as short as possible.
(2 Marks)
(ii) Explain the income tax (IT), national insurance (NIC) and capital gains tax (CGT) implications arising onthe grant to and exercise by an employee of an option to buy shares in an unapproved share optionscheme and on the subsequent sale of these shares. State clearly how these would apply in Henry’scase. (8 marks)
点击查看答案
(d) Explain how Gloria would be taxed in the UK on the dividends paid by Bubble Inc and the capital gains taxand inheritance tax implications of a future disposal of the shares. Clearly state, giving reasons, whether ornot the payment made to Eric is allowable for capital gains tax purposes. (9 marks)You should assume that the rates and allowances for the tax year 2005/06 apply throughout this question.
5 (a) Carver Ltd was incorporated and began trading in August 2002. It is a close company with no associatedcompanies. It has always prepared accounts to 31 December and will continue to do so in the future.It has been decided that Carver Ltd will sell its business as a going concern to Blade Ltd, an unconnectedcompany, on 31 July 2007. Its premises and goodwill will be sold for ￡2,135,000 and ￡290,000 respectivelyand its machinery and equipment for ￡187,000. The premises, which do not constitute an industrial building,were acquired on 1 August 2002 for ￡1,808,000 and the goodwill has been generated internally by thecompany. The machinery and equipment cost ￡294,000; no one item will be sold for more than its original cost.The tax adjusted trading profit of Carver Ltd in 2007, before taking account of both capital allowances and thesale of the business assets, is expected to be ￡81,000. The balance on the plant and machinery pool for thepurposes of capital allowances as at 31 December 2006 was ￡231,500. Machinery costing ￡38,000 waspurchased on 1 March 2007. Carver Ltd is classified as a small company for the purposes of capital allowances.On 1 August 2007, the proceeds from the sale of the business will be invested in either an office building or aportfolio of UK quoted company shares, as follows:Office buildingThe office building would be acquired for ￡3,100,000; the vendor is not registered for value added tax (VAT).Carver Ltd would borrow the additional funds required from a UK bank. The building is let to a number ofcommercial tenants who are not connected with Carver Ltd and will pay rent, in total, of ￡54,000 per calendarquarter, in advance, commencing on 1 August 2007. The company’s expenditure for the period from 1 August2007 to 31 December 2007 is expected to be:￡Loan interest payable to UK bank 16,000Building maintenance costs 7,500Share portfolioShares would be purchased for the amount of the proceeds from the sale of the business with no need for furtherloan finance. It is estimated that the share portfolio would generate dividends of ￡36,000 and capital gains, afterindexation allowance, of ￡10,000 in the period from 1 August 2007 to 31 December 2007.All figures are stated exclusive of value added tax (VAT).Required:(i) Taking account of the proposed sale of the business on 31 July 2007, state with reasons the date(s) onwhich Carver Ltd must submit its corporation tax return(s) for the year ending 31 December 2007.(2 marks)
(b) Prepare a reasoned explanation of how any capital gains tax arising in the UK on the sale of the paintingscan be minimised. (2 marks)
听力原文：Commercial banks are mainly to provide short-term loans for the capital market with the acquired deposits and the funds from other channels.(2)A．Commercial banks mainly provide short-term loans for the capital market.B．The capital market mainly depends on the acquired deposits and the funds from other channels.C．Short-term loans are mainly from the acquired deposits and the funds from other channels.D．Commercial banks mainly depend on the capital market for deposits and the funds.
Nowadays a private business usually obtains its working capital through a commercial bank.A．RightB．WrongC．Doesn't say
KFP Co, a company listed on a major stock market, is looking at its cost of capital as it prepares to make a bid to buy a rival unlisted company, NGN. Both companies are in the same business sector. Financial information on KFP Co and NGN is as follows:NGN has a cost of equity of 12% per year and has maintained a dividend payout ratio of 45% for several years. The current earnings per share of the company is 80c per share and its earnings have grown at an average rate of 4·5% per year in recent years.The ex div share price of KFP Co is $4·20 per share and it has an equity beta of 1·2. The 7% bonds of the company are trading on an ex interest basis at $94·74 per $100 bond. The price/earnings ratio of KFP Co is eight times.The directors of KFP Co believe a cash offer for the shares of NGN would have the best chance of success. It has been suggested that a cash offer could be financed by debt.Required:(a) Calculate the weighted average cost of capital of KFP Co on a market value weighted basis. (10 marks)(b) Calculate the total value of the target company, NGN, using the following valuation methods:(i) Price/earnings ratio method, using the price/earnings ratio of KFP Co; and(ii) Dividend growth model. (6 marks)(c) Discuss the relationship between capital structure and weighted average cost of capital, and comment onthe suggestion that debt could be used to finance a cash offer for NGN. (9 marks)
