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Business and management paper 2 HL 2013 May.pdf
Business_and_management_paper_2_HL_2013_May.pdf
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Business and management paper 2 HL 2013 May.pdf-M1...
Business_and_management_paper_2_HL_2013_May.pdf-M13/3/BUSMT/HP2/ENG/TZ0/XX BUSINESS AND MANAGEMENT HIGHER LEVEL
Business and management paper 2 HL ...
Business_and_management_paper_2_HL_2013_May.pdf-M13/3/BUSMT/HP2/ENG/TZ0/XX BUSINESS AND MANAGEMENT HIGHER LEVEL
Page 3
M13/3/BUSMT/HP2/ENG/TZ0/XX
2213-5012
– 3 –
Turn over
(Question 1 continued)
(a)
Describe
two
benefits for
LR
of using cell production.
[4 marks]
(b)
Explain
two
benefits for
LR
of meeting quality standards.
[4 marks]
(c)
Calculate the following for
LR
(show all your working)
:
(i)
the payback period.
[2 marks]
(ii)
the average rate of return (ARR).
[2 marks]
(iii)
the net present value (NPV) using a discount rate of 8
%.
[2 marks]
(iv)
the gearing ratio if the acquisition of
El Remanzo
by
LR
is financed by
a loan.
[2 marks]
(d)
Comment on your results to parts (c)(iii) and (c)(iv).
[3 marks]
(e)
Analyse
two
costs to
LR
resulting from the acquisition of
El Remanzo
.
[6 marks]
Page 4
M13/3/BUSMT/HP2/ENG/TZ0/XX
2213-5012
– 4 –
2.
Icarus
Icarus
is an adventure tourism company.
It has developed a family brand of innovative tourism
products, such as the World’s first underwater theme park.
Its next objective is to build the
first hotel in outer space by 2016.
Icarus
conducted market research using stratified samples of
businessmen/businesswomen and families with incomes over $10
000 000.
Most said that they
would pay the proposed price of $140 000 per room per night.
Although the hotel should create
significant profits,
Icarus
’ Board of Directors is concerned about both safety and financial risks.
[Source: http://en.wikipedia.org/wiki/File:Aurora-SpaceShuttle-EO.jpg]
Icarus
has invested significant funds to develop safety procedures and to train the employees of the
future hotel.
Icarus
wants to protect its brand image as the most trusted adventure tourism company
in the world.
The hotel will have a capacity of 500 rooms.
Originally (in 2012)
Icarus
forecasted the following
(in $):
price per room per night (room rate): 140 000
fixed costs: 10
000 000
variable cost per room per night: 100
000.
Now (in 2013) the costs of construction, fuel and insurance have increased and affected the forecast.
To ensure a 2016 opening,
Icarus
has identified a potential investor.
The problem is that he expects
a $2 000
000 guaranteed (target) profit in the first year, but
Icarus
has promised not to increase its
room prices.
The following shows the revised forecasted figures (in $):
price per room per night (room rate): 140 000
target profit required by investor: 2
000 000
fixed costs: 12
000 000
variable cost per room per night: 108
000.
Page 5
M13/3/BUSMT/HP2/ENG/TZ0/XX
2213-5012
– 5 –
Turn over
The Board of Directors are concerned that:
keeping room prices the same will reduce profits
other adventure tourism companies are considering entering the outer space tourism market
withdrawing from the project would damage
Icarus’
brand image and would cost millions of
dollars.
(a)
Describe
two
advantages to
Icarus
of having a family brand.
[4 marks]
(b)
Explain
one
advantage and
one
disadvantage to
Icarus
of using stratified
samples in its market research.
[4 marks]
(c)
(i)
Using the
original
forecasted figures (in 2012), calculate
Icarus’
break-even point
(show all your working)
.
[2 marks]
(ii)
Using the
revised
forecasted figures (in 2013), calculate
Icarus’
break-even point
(show all your working).
[2 marks]
(d)
(i)
Using the
revised
forecasted figures, construct a fully labelled break-even
chart for 2013.
[4 marks]
(ii)
Explain the limitations of the 2013 break-even chart from part (i) as a
decision-making tool for
Icarus
.
[3 marks]
(e)
Analyse
Icarus’
decision to open the first hotel in outer space.
[6 marks]
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