EXAMINER’S GENERAL COMMENTS The performance of the students in this paper was an improvement over the previous diets. There was fair understanding of the questions. Students are advised to cultivate the habit of reading generally and more on fundamental principles of financial management. This is so because the AFM is built on general knowledge in business and the principles of financial management.

STANDARD OF THE PAPER The questions were of the highest standard of the recent examination papers. They fairly represented the syllabus of the Advanced Financial Management. Question one assessed the students on financing of a project using government subsidy. Thus, dealing with Adjusted Present Values. Students were also examined on cost of capital and risk. This question and the instructions were clear. The marks allocated were also fair for the efforts needed to answer the question. Question two examined the students on International Capital Budgeting and how Multinational Companies can deal with blocked funds. The question was not ambiguous and the instructions were certain on what students were to do. Question three sought to test students understanding on issues such as why takeovers and mergers fail, economic and financial essence of a takeover, and valuation of a business for a takeover using Free Cash Flow concepts. The question tested students understanding on how to adjust financial statements to obtain free cash flows. Marks allotted were fair. Question four was on economic value-added (EVA) computation and the differences between spin-off and sell-off. This question was very comprehensive on the principles behind EVA. The problem with the question was that students were made to compute value based on EVA in (a) and the net operating profit (NOPAT) in (b). It should have been the other way round. This was an anomaly in the question. Question five was the only strange question for the reason that it sought to test students understanding of choosing from a cheaper source of finance by calculating interest cost and adjusting by depreciation of currencies. The question was a little ambiguous in the sense that a lot of assumptions would have to be made.