（ii) Calculate Paul’s tax liability if he exercises the share options in Memphis plc and s

(ii) Calculate her income tax (IT) and national insurance (NIC) payable for the year of assessment 2006/07.

(4 marks)

(ii) Calculate the chargeable gain arising as a consequence of Jan accepting Jumper’s offer. (4 marks)

(ii) Calculate the probability of the net profit being less than ￡75 million. (2 marks)

(ii) Calculate the minimum target contribution to sales ratio (%) at which ‘Nellie the Elephant’ will be

financially viable, assuming that all other data remain unchanged. (4 marks)

(ii) List the additional information required in order to calculate the employment income benefit in respect

of the provision of the furnished flat for 2007/08 and advise Benny of the potential income tax

implications of requesting a more centrally located flat in accordance with the company’s offer.

(4 marks)

(ii) Calculate the corporation tax (CT) payable by Tay Limited for the year ended 31 March 2006, taking

advantage of all available reliefs. (3 marks)

(iii) Calculate the cash remaining in the company as a result of the salary and dividend payments made in

(ii) above. (1 mark)

(ii) Assuming the new structure is implemented with effect from 1 August 2006, calculate the level of

management charge that should be made by Bold plc to Linden Limited for the year ended 31 July

2007, so as to minimise the group’s overall corporation tax (CT) liability for that year. (2 marks)

(ii) Using the previous overhead allocation basis (as per note 4), calculate the budgeted profit/(loss)

attributable to each type of service for the year ending 31 December 2006 and comment on the results

obtained using the previous and revised methods of overhead allocation. (5 marks)

(c) Calculate the theoretical ex rights price per share and the net funds to be raised by the rights issue, and

determine and discuss the likely effect of the proposed expansion on:

(i) the current share price of Merton plc;

(ii) the gearing of the company.

Assume that the price–earnings ratio of Merton plc remains unchanged at 12 times. (11 marks)