(b) (i) [Appendix 1]
Prior to implementation of any proposal
Cost of equity 1
Cost of debt 1
Market value of equity 1
Market value of debt 2
Cost of capital 1
After implementing the first director’s proposal
Market value of debt 2
Morada Co, asset beta 1
Asset beta of travel services only 1
Equity beta of travel services only 1
Cost of equity 1
Cost of capital 1
After implementing the second director’s proposal
Market value of debt 2
Cost of equity 1
Cost of capital 1
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17
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(ii) [Appendix 2]
Adjusted earnings, first director’s proposal 2
Financial position, first director’s proposal 2
Adjusted earnings, second director’s proposal 2
Financial position, second director’s proposal 1
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7
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(iii) Discussion 5–6
Assumptions 2–3
Reasoned recommendation 1–2
––––
(Note: Maximum 8 marks if no recommendation given) Max 9
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Professional marks for part (b)
Report format 1
Structure and presentation of the report 3
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4