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AFC 2018 MULTIPLE CHOICE TEST (individual assignment) Call 4th Feb. 2019 1. You are trying to calculate the value of ROE of Wind Ltd for 20 18, a company operating in the renewables industry, but you do not have access to the financial statements. You were able to gather just the following information: - Total assets = 150 mln € - Total liabilities = 70 mln €. - Asset Turnover Ratio (ATR) = 2; - Effective tax rate = 35%; - Net profit margin (NPM) = 10%; - Cash EVA = 10 mln €. On the base of these data, it is TRUE that: (4 Points) A. ROE (year 2018) = 18.75% B. ROE (year 2018) = 12.5% C. There is not enough information to calculate ROE (year 2018) D. None of the previous answers is true Solution: Equity = 150 (total assets) – 70 (total liabilities) = 80 mln £ Revenues = 150 (total assets) * 2 (asset turnover ratio) = 300 mln £ Net profit = 300 (revenues) * 5% (net profit margin) = 15 mln £ ROE = (15 / 80)*100% = 18.75% 2. With regard to the financial statements consolidation, which of the following is a preliminary step, needed to harmonize financial statements of the different legal entities and prepare them f o r t h e c o n s o l i d a t i o n ? (2 Points) A. Adjust for current year additional depreciation due to any fair value adjustments or current year impairment B. Remove any intra-group interest relating to intra-group loans b etween the parent and subsidiary C. Uniform the accounting periods of the parent and subsidiary financial statements, if needed D. Eliminate any intra-group sales between the parent and subsidiary 3. Company B manufactures mechanical materials and general-purpose machinery for the Oil & Gas sector. Products go through a subassembly line and a mechanical workshop. Company B also has the following departments: Finance, R&D, Adm inistrative…