Practice Question 1 — Carbon Fibre 3D Printing Proposal

From: Agata Paluch, Chief Financial Officer

To: Senior Finance Manager
Subject: FWD: Carbon fibre printer development proposal

Hello,

I have forwarded an email that I received from Dr Said Abouchdak, our Chief Technical
Officer.

Said has suggested that Kwirtmak should invest in the development of a new range of 3D
printers capable of printing carbon fibre composite components. He believes that this could
help Kwirtmak enter high-growth markets such as aerospace, automotive and sporting goods,
where customers require materials that are both light and strong.

I need your help with two matters:

● First, evaluate the proposal to develop carbon fibre 3D printers using the suitability,
feasibility and acceptability criteria.
[sub-task (a) = 60%]

● Second, discuss how this proposal could affect Kwirtmak’s principal risks and
recommend how these risks should be managed.
[sub-task (b) = 40%]

Agata

Question 1 — Carbon Fibre 3D Printing

Proposal
Sub-task A — Evaluate the proposal using suitability,
feasibility and acceptability
The proposal to develop a new range of carbon fibre 3D printers appears to be suitable for
Kwirtmak because it is consistent with the company’s mission to transform customers
through innovation in design and production. Carbon fibre is attractive because it is light but
strong, which makes it suitable for industries such as aerospace, automotive and sporting
goods. This links directly to Kwirtmak’s existing customer base, as the pre-seen states that
Kwirtmak already supplies aerospace and automotive customers. Therefore, the proposal
could allow Kwirtmak to build on its existing market knowledge rather than entering a
completely unrelated industry.
The proposal is also suitable because it could strengthen Kwirtmak’s differentiation strategy.
Kwirtmak’s products are already positioned as high-quality printers with technical support,
and its prices reflect superior components and build quality. A carbon fibre printer would
support this premium positioning because customers in aerospace and automotive industries
may value strength, accuracy and technical support more than low price. This would help
Kwirtmak avoid competing only on price against Breskko, its closest competitor.

However, suitability depends on whether carbon fibre printing fits the needs of Kwirtmak’s
customers. Carbon fibre is useful only where customers require components that are both
lightweight and strong. It may not be relevant for all customers, such as those producing
simple plastic prototypes or jewellery. Therefore, Kwirtmak should not assume that all its
customers will want this new printer. It should first target sectors where the benefits are clear,
such as aerospace, automotive and sporting goods.

The proposal also appears feasible because Kwirtmak already has strong technical capability.
It manufactures several types of commercial 3D printers, including extrusion,
stereolithography, digital light processing, laser melting and material jetting printers. The
company also has an experienced CTO and a research and product development function.
This suggests that Kwirtmak may have the technical knowledge required to develop a new
printer range.

Financial feasibility must be considered carefully. Kwirtmak remains profitable, but its
revenue fell from E$2,856.6 million in 2025 to E$2,320.0 million in 2026, and profit fell
from E$1,142.4 million to E$810.6 million. This means the company may not have unlimited
capacity to fund a risky development project. Kwirtmak also has borrowings of E$1,350
million, so taking on more debt could increase financial risk. Therefore, the project should be
developed in stages rather than through a large immediate investment.

Operational feasibility is also important. Carbon fibre printing may require new suppliers,
new materials testing and new quality control procedures. If Kwirtmak cannot guarantee
consistent material quality, the printer output may fail to meet customer requirements. This is
particularly important because aerospace and automotive parts may be safety-critical.
Therefore, feasibility depends not only on the ability to design the printer, but also on the
ability to test, support and maintain it after launch.

The proposal may be acceptable to shareholders if it can improve long-term growth.

Kwirtmak’s recent financial performance has declined, while Breskko has performed
strongly. Shareholders may therefore welcome a proposal that could help Kwirtmak regain
competitiveness. However, shareholders may also be concerned because Kwirtmak has a beta
of 2.3, meaning its shares are already high risk. A major R&D project could increase
uncertainty further.

Customers are likely to find the proposal acceptable if it allows them to manufacture stronger
and lighter components. However, they will only accept it if the printer is reliable, safe and
cost-effective. Employees may also accept the proposal because it provides opportunities to
work on advanced technology, but they may require additional training.

Overall, the proposal is strategically attractive and should be pursued, but only through a
phased development programme. Kwirtmak should begin with market research, prototype
development and selected customer trials before committing to full commercial production.
Sub-task B — Discuss impact on principal risks and
recommend how these risks should be managed
The first risk is quality failure. Carbon fibre parts may be used in aerospace or automotive
applications, where component failure could have serious consequences. If Kwirtmak’s
printer produces defective parts, the company could face legal claims, compensation costs
and reputational damage. This risk is especially important because Kwirtmak’s pre-seen
identifies product quality as a principal risk.

To manage this risk, Kwirtmak should introduce strict testing before launch. It should test the
printer under different operating conditions and with different materials. It should also
document the printer’s limitations clearly, so customers understand what applications are
suitable.

The second risk is supplier risk. Carbon fibre materials may require specialist suppliers. If
suppliers provide inconsistent or defective materials, the output from Kwirtmak’s printers
may be poor. This could damage Kwirtmak’s reputation even if the printer itself is well
designed.

Kwirtmak should manage this by approving suppliers carefully, carrying out supplier audits
and requiring quality certification for all materials. It should also consider developing its own
compatible carbon fibre materials, as it already supplies materials for its existing printers.

The third risk is financial risk. Developing carbon fibre printers may require significant
R&D expenditure, and there is no guarantee that customers will buy the final product. If
demand is lower than expected, Kwirtmak may not recover its investment.

Kwirtmak should use a staged investment process. Each stage should have a clear budget,
timeline and success criteria. If the prototype fails, or if customer interest is weak, the Board
should be able to stop the project before too much money is spent.

The fourth risk is competitive risk. If Kwirtmak delays, Breskko or another competitor may
develop similar technology first. However, rushing the project could lead to technical
problems.

Kwirtmak should move quickly but carefully. It should protect its intellectual property
through patents and confidentiality agreements. It should also work with selected strategic
customers to develop the printer around real market needs.

In conclusion, the project should proceed, but only with strong technical testing, supplier
controls, financial monitoring and phased investment approval.
Practice Question 2 — Medical 3D Printing Market Entry
From: Agata Paluch, Chief Financial Officer
To: Senior Finance Manager
Subject: FWD: Medical sector opportunity

Hello,

I have forwarded an email that I received from Ouyang Qi, our Marketing Director.

Ouyang has identified an opportunity for Kwirtmak to sell specialist 3D printers to hospitals,
dentists and medical laboratories. These printers would be used to manufacture artificial body
parts, dental implants and other medical components. However, the materials used would
require approval from the Ennlandian Health Service before they could be used with patients.

I need your help with two matters:

● First, evaluate the strategic benefits and risks of entering the medical 3D printing
market.
[sub-task (a) = 50%]

● Second, discuss the ethical and reputational issues that Kwirtmak should consider
before selling printers and materials for medical use.
[sub-task (b) = 50%]

Agata

Sub-task A — Evaluate the strategic benefits and risks

Entering the medical 3D printing market could provide Kwirtmak with an important growth
opportunity. The pre-seen states that doctors and dentists are increasingly using 3D printing
to create dental implants, artificial limbs and other medical components. This suggests that
demand for accurate and reliable 3D printers in the medical sector is growing.

This market could be attractive because medical customers require high-quality and accurate
output. This fits Kwirtmak’s existing strengths, as its printers are positioned as high-quality
products and the company has a strong reputation for technical advice. Printers such as
stereolithography and material jetting could be suitable because they can produce accurate
objects with smooth finishes.

The proposal also supports diversification. Kwirtmak currently serves several industrial
sectors, including aerospace, automotive, consumer electronics and jewellery. Entering
medical printing could reduce dependence on existing sectors and create a new source of
revenue. This is important because the pre-seen identifies volatile sales demand as a principal
risk.
However, the medical market carries significant risks. The first major risk is regulatory risk.
The pre-seen states that materials used in medical applications must be approved by the
Ennlandian Health Service before they can be used with patients. This could delay product
launches and increase compliance costs. Kwirtmak cannot simply sell standard printers and
materials into the medical market without ensuring that they meet regulatory requirements.

The second risk is product liability. If a printer produces a defective medical implant, the
consequences could affect patient health and safety. Even if the defect is caused by customer
misuse, Kwirtmak may still suffer reputational damage. Therefore, this market is more
sensitive than some of Kwirtmak’s existing markets.

The third risk is reputational risk. Success in medical printing could enhance Kwirtmak’s
brand, but failure could damage trust in all of its products. Customers in aerospace and
automotive may also become concerned if Kwirtmak is linked to poor quality or unsafe
medical products.

Overall, the medical market is strategically attractive, but Kwirtmak should enter cautiously.
It should initially focus on lower-risk applications, such as dental models or non-critical
medical components, before moving into high-risk implants.

Sub-task B — Discuss ethical and reputational issues

The most important ethical issue is patient safety. Kwirtmak must ensure that its printers and
materials are safe for medical use. It would be unethical to sell printers for patient-related
applications without proper approval, testing and guidance. The company should not allow
profit growth to override safety.

Another ethical issue is truthful marketing. Kwirtmak should avoid overstating what its
printers can do. Medical customers must understand the limitations of the printers, the
approved materials and the need for skilled operators. If Kwirtmak exaggerates the accuracy
or safety of its products, customers may use them in unsuitable ways.

Kwirtmak should also consider training. A printer may be technically capable of producing
accurate parts, but poor CAD input, incorrect settings or unsuitable materials could result in
defective output. Therefore, Kwirtmak should provide training and possibly certification for
medical customers. This would reduce the risk of misuse and protect patients.

There is also an ethical issue around accountability. Kwirtmak must be clear about who is
responsible for the final medical product. If the customer designs the part and operates the
printer, then the customer has responsibility. However, Kwirtmak still has responsibility for
the safety and reliability of the printer and approved materials.

From a reputational perspective, the medical market could greatly enhance Kwirtmak’s image
as an innovative and socially useful company. However, any safety failure could lead to
serious negative publicity. Therefore, Kwirtmak should work closely with regulators, medical
experts and selected pilot customers before a full launch.

In conclusion, Kwirtmak should enter the medical market only if it can meet high ethical,
regulatory and quality standards.
Practice Question 3 — Rights Issue to Fund New Factory
From: Agata Paluch, Chief Financial Officer
To: Senior Finance Manager
Subject: FWD: New production facility

Hello,

I have forwarded an email that I received from David Wallace, our Chief Executive Officer.

David believes that Kwirtmak should build a new factory in Ennland to increase production
capacity for laser melting and material jetting printers. These printers are expected to be in
higher demand because they can produce strong, accurate and complex objects for
commercial customers.

The estimated cost of the new factory is E$450 million. David has suggested that the project
should be financed through a rights issue.

I need your help with two matters:

● First, recommend with reasons how the proposed rights issue should be managed.
[sub-task (a) = 50%]

● Second, evaluate the impact of the new factory on Kwirtmak’s shareholders,

customers and employees.
[sub-task (b) = 50%]

Agata

Question 3 — Rights Issue to Fund New

Factory
Sub-task A — Recommend how the rights issue should be
managed
A rights issue could be an appropriate way to fund the proposed E$450 million factory
because Kwirtmak is a quoted company and can raise equity from existing shareholders. A
rights issue gives existing shareholders the right to buy new shares in proportion to their
current holding. This helps protect them from dilution if they take up their rights.

The rights issue should be managed with clear communication. Kwirtmak should explain that
the funds will be used to build a new factory to increase production capacity for laser melting
and material jetting printers. This is important because these printers are suitable for
producing strong, accurate and complex parts. Shareholders are more likely to support the
rights issue if they understand how the new factory supports future growth.
The issue price should be set at a discount to the current market price. This would encourage
shareholders to subscribe. However, the discount should not be too large, because a very deep
discount may suggest that Kwirtmak is desperate for cash. This could damage market
confidence.

Kwirtmak should consider underwriting the rights issue. An underwriter would agree to buy
any shares not taken up by shareholders. This would give Kwirtmak certainty that it can raise
the full E$450 million. However, underwriting fees will increase the cost of the issue. Given
the size of the investment, underwriting may still be worthwhile.

Kwirtmak should also consult major shareholders before making the announcement. This
would help the Board understand whether shareholders are likely to support the proposal. If
major shareholders are not supportive, the rights issue could fail or damage confidence in
management.

The timing of the rights issue must also be considered. Kwirtmak’s financial performance
declined in 2026, and its share price has been volatile. Therefore, investors may be cautious.
The Board should present a strong business case, including expected cash flows, payback
period and strategic benefits.

In conclusion, the rights issue should be underwritten, priced at a reasonable discount and
supported by strong shareholder communication.

Sub-task B — Evaluate the impact on shareholders,

customers and employees
For shareholders, the rights issue could have both positive and negative effects. The negative
effect is dilution. Shareholders who do not take up their rights will own a smaller percentage
of the company. They may also be concerned that Kwirtmak is raising equity after a year of
weaker financial performance.

However, the positive effect is that the new factory could improve long-term growth. If the
factory increases production capacity and supports higher sales, shareholders may benefit
from future share price growth and dividends. Therefore, the rights issue is acceptable if the
expected return from the factory is greater than the cost of equity.

For customers, the new factory could improve availability and reduce lead times. This is
important because Kwirtmak’s commercial customers may rely on printers for important
production activities. Greater capacity may also allow Kwirtmak to meet growing demand for
advanced printers.

However, there is a risk that rapid expansion could affect quality. If Kwirtmak recruits new
staff quickly or starts production before systems are fully tested, product quality may fall.
This would damage customer confidence. Therefore, factory expansion should be supported
by strong quality control and training.

For employees, the factory could create new jobs and career opportunities. Existing
employees may benefit from promotion or training in advanced printer technology. However,
the project may also create pressure on staff, especially operations, finance and HR teams.
There may also be anxiety if employees believe production could be moved from existing
sites.

Overall, the new factory could benefit shareholders, customers and employees, but only if the
project is well planned and financially justified.

Practice Question 4 — Sustainability and Integrated

Reporting
From: Agata Paluch, Chief Financial Officer
To: Senior Finance Manager
Subject: FWD: Sustainability claims

Hello,

I have forwarded an email that I received from Kristina Eder, our Operations Director.

Kristina would like Kwirtmak to promote its 3D printers as a sustainable alternative to

traditional manufacturing. She argues that 3D printing reduces material waste, allows local
production and can reduce the need for transportation. She also wants these benefits to be
emphasised in Kwirtmak’s next Integrated Reporting report.

I need your help with two matters:

● First, evaluate whether Kwirtmak can justify claiming that its 3D printing technology
enhances natural capital.
[sub-task (a) = 50%]

● Second, discuss whether Kwirtmak’s sustainability reporting could improve social

and relationship capital with customers, regulators and investors.
[sub-task (b) = 50%]

Agata

Question 4 — Sustainability and Integrated

Reporting
Sub-task A — Evaluate whether Kwirtmak can claim
enhancement of natural capital
Natural capital refers to environmental resources such as raw materials, energy, air, water and
ecosystems. Kwirtmak can make some reasonable claims that its 3D printing technology
supports natural capital, but these claims must be balanced and evidence-based.
The first argument is that 3D printing can reduce material waste. Traditional manufacturing
often starts with a block of material and removes unwanted material to create the final item.
In contrast, 3D printing is additive, meaning that material is built up layer by layer. This can
result in more efficient material use. This supports Kwirtmak’s claim that 3D printing can
help protect natural capital.

The second argument is that 3D printing can reduce transport. If customers print components
close to the point of use, they may not need to transport finished parts over long distances.
This could reduce carbon emissions. This is particularly relevant for customers such as
aerospace businesses that may need spare parts quickly at different locations.

The third argument is recycling. The pre-seen states that many plastics used in 3D printing
can be recycled as new filament. This supports the idea that Kwirtmak’s technology can
contribute to a circular economy.

However, Kwirtmak must avoid overstating the sustainability benefits. Some 3D printing
processes may use significant energy, especially laser melting, curing and heating processes.
Some materials may also be difficult to recycle or may require post-processing. Therefore,
not every 3D printing application will automatically enhance natural capital.

Kwirtmak also needs reliable metrics. The pre-seen states that energy consumption associated
with PLA printing was reduced by 32% through adjustments to nozzle temperature and layer
thickness. This type of measurable evidence is useful because it supports the sustainability
claim.

In conclusion, Kwirtmak can claim that its printers may enhance natural capital, but it should
use careful wording. It should say that 3D printing can reduce waste and transport in suitable
applications, rather than claiming that all 3D printing is environmentally friendly.

Sub-task B — Discuss whether sustainability reporting

could improve social and relationship capital
Social and relationship capital refers to the relationships that Kwirtmak has with customers,
suppliers, regulators, investors and wider society. Sustainability reporting could improve
these relationships if it is transparent and credible.

For customers, clear sustainability reporting could increase trust. Many commercial
customers have their own sustainability targets. If Kwirtmak can show that its printers reduce
waste, support recycling and lower transport emissions, customers may prefer Kwirtmak over
competitors. This could improve customer loyalty and strengthen Kwirtmak’s competitive
position.

For regulators, sustainability reporting could demonstrate that Kwirtmak is a responsible

business. The pre-seen states that Kwirtmak engages with government and regulators to assist
in developing realistic sustainability targets. Transparent reporting could support this
relationship and make regulators more confident that Kwirtmak takes environmental issues
seriously.
For investors, sustainability reporting could improve confidence in long-term risk
management. As a quoted company, Kwirtmak needs to show that it is managing
environmental, social and governance issues properly. Investors may be more willing to
support the company if they believe that sustainability risks are being controlled.

For employees, sustainability reporting may improve motivation and pride. Employees may
feel more committed to a company that is trying to reduce environmental impact and act
responsibly.

However, there is a risk of greenwashing. If Kwirtmak makes claims that are too broad or
unsupported, it could damage trust. For example, claiming that all 3D printing is sustainable
would be risky because some processes may consume high energy. Therefore, Kwirtmak
should report both positive and negative impacts.

In conclusion, sustainability reporting can improve social and relationship capital, but only if
it is honest, balanced and supported by evidence.

Practice Question 5 — Acquisition of Small 3D Scanning

Business
From: Agata Paluch, Chief Financial Officer
To: Senior Finance Manager
Subject: FWD: Possible acquisition

Hello,

I have forwarded an email that I received from David Wallace, our Chief Executive Officer.

David is considering the acquisition of ScanBuild, a small technology company that

specialises in high-definition 3D scanners and CAD software. ScanBuild’s technology could
help Kwirtmak’s customers scan existing objects and modify them before printing
replacement parts.

The acquisition would be expensive, but David believes that it would strengthen Kwirtmak’s
product offering and create cross-selling opportunities.

I need your help with two matters:

● First, evaluate the strategic advantages and disadvantages of acquiring ScanBuild.

[sub-task (a) = 50%]
● Second, discuss the financial and non-financial factors that should be considered
before deciding whether to proceed with the acquisition.
[sub-task (b) = 50%]

Agata

Question 5 — Acquisition of 3D Scanning

Business
Sub-task A — Evaluate the strategic advantages and
disadvantages
The acquisition of ScanBuild could provide several strategic advantages for Kwirtmak. 3D
scanning technology is closely related to 3D printing because it allows customers to scan
existing objects, edit them using CAD software and then print replacement parts. This fits the
pre-seen explanation that 3D scanning can speed up the design process by creating a file that
can be edited in 3D CAD software.

The acquisition could strengthen Kwirtmak’s product offering. Instead of selling only printers
and materials, Kwirtmak could offer a complete solution involving scanning, CAD design,
printing and compatible materials. This could make Kwirtmak more attractive to customers
who want an integrated system.

The acquisition could also create cross-selling opportunities. Kwirtmak could sell ScanBuild
scanners to its existing printer customers, and ScanBuild customers could be introduced to
Kwirtmak printers and materials. This could increase revenue and improve customer loyalty.

The acquisition could also help Kwirtmak differentiate itself from Breskko. If Kwirtmak can
offer a wider technology solution, it may be less vulnerable to price competition.

However, there are also disadvantages. The acquisition may be expensive, and Kwirtmak
could overpay if it becomes too optimistic about synergies. This could create goodwill that
may later be impaired if the acquisition does not perform as expected.

There is also integration risk. ScanBuild may have a different culture, different systems and
different development priorities. If key technical staff leave after the acquisition, Kwirtmak
may lose much of the value it paid for.

There is also technology risk. ScanBuild’s scanning software may not integrate smoothly
with Kwirtmak’s printers or with customers’ CAD systems. If integration is poor, customers
may not see the expected benefit.

Overall, the acquisition is strategically attractive, but Kwirtmak should proceed only after
detailed due diligence.

Sub-task B — Discuss financial and non-financial factors

Financially, Kwirtmak should assess ScanBuild’s revenue, profit, cash flow and growth
prospects. It should not rely only on current profit, because a technology company’s value
may depend heavily on future growth. Kwirtmak should prepare a discounted cash flow
valuation and compare it with market-based valuation methods.

Kwirtmak should also assess the expected synergies. These may include higher printer sales,
higher materials sales and additional revenue from scanner sales. However, synergies should
be realistic and not overstated.

Funding is another important financial factor. If Kwirtmak uses debt, gearing and finance
costs may increase. If it uses shares, existing shareholders may suffer dilution. Given that
Kwirtmak already has E$1,350 million borrowings, the Board should be cautious about
adding more debt.

Non-financially, Kwirtmak should assess the quality of ScanBuild’s technology. It should

review patents, software reliability, compatibility with CAD packages and the accuracy of the
scanners.

Kwirtmak should also assess staff retention. ScanBuild’s skilled engineers and software
developers may be critical to the acquisition’s success. Kwirtmak may need retention bonuses
or career development plans to keep them.

Customer reputation is also important. If ScanBuild has poor service quality, acquiring it
could damage Kwirtmak’s brand. However, if ScanBuild has strong customer relationships,
this could increase the value of the deal.

In conclusion, Kwirtmak should acquire ScanBuild only if the price is fair, the technology is
compatible and key staff can be retained.

Practice Question 6 — Quality Failure in Aerospace

Printers
From: Agata Paluch, Chief Financial Officer
To: Senior Finance Manager
Subject: FWD: Customer complaint

Hello,

I have forwarded an email that I received from Ouyang Qi, our Marketing Director.

One of Kwirtmak’s aerospace customers has reported that a laser melting printer supplied by
Kwirtmak produced several defective spare parts. The customer has not used the parts in
aircraft, but it is concerned that the fault could have caused serious safety problems if the
parts had been installed.
The customer is threatening to cancel its maintenance contract and is considering legal action.

I need your help with two matters:

● First, evaluate the risks to Kwirtmak arising from this quality failure.
[sub-task (a) = 50%]

● Second, recommend the actions that Kwirtmak should take to protect its reputation
and maintain customer confidence.
[sub-task (b) = 50%]

Agata

Sub-task A — Evaluate the risks to Kwirtmak

The reported quality failure creates serious risk for Kwirtmak because the customer is in the
aerospace industry. Aerospace customers require very high reliability because defective
components could have serious safety consequences.

The first risk is legal risk. The customer may claim that Kwirtmak breached the contract by
supplying a printer that did not produce parts to the required specification. This could lead to
compensation claims, legal costs and possible settlement payments.

The second risk is reputational risk. Kwirtmak’s reputation is based on high quality and
technical advice. If an aerospace customer loses confidence in Kwirtmak’s printer, other
customers may also become concerned. This could affect future sales, especially in industries
where safety and reliability are important.

The third risk is financial risk. Kwirtmak may lose the maintenance contract, pay
compensation, repair or replace the printer, or provide additional customer support at no
charge. If the problem affects several printers, the cost could become significant.

The fourth risk is operational risk. The failure may indicate a weakness in hardware,
software, materials or customer training. If the root cause is not identified, the same problem
could happen again.

The fifth risk is regulatory risk. Aerospace is a highly regulated industry. Even though the
defective parts were not used in aircraft, the issue may still attract attention from regulators or
industry bodies.

Overall, the risk is serious because even a near miss can damage trust in Kwirtmak’s quality.

Sub-task B — Recommend actions

Kwirtmak should respond immediately and professionally. The first action should be to
contact the customer, acknowledge the concern and send a specialist technical team to
investigate. The customer should be advised not to use the printer for safety-critical parts
until the problem is understood.
Kwirtmak should conduct a root cause investigation. It should determine whether the defect
was caused by printer hardware, software, material quality, CAD input, maintenance issues or
operator error. This is important because the correct response depends on the cause.

If Kwirtmak is responsible, it should repair or replace the printer and consider compensating
the customer for reasonable losses. It may also offer temporary support, such as priority
access to another machine or technical staff, to reduce disruption.

Kwirtmak should also check whether the same fault could affect other customers. If
necessary, it should issue a software update, product recall or safety notice. This may be
costly, but it is better than allowing the problem to continue.

The company should manage communication carefully. Ouyang’s public relations team
should prepare a response that is transparent but avoids making unsupported statements
before the investigation is complete. The aim should be to show that Kwirtmak takes safety
seriously.

In conclusion, Kwirtmak should treat the incident as a serious safety and reputation matter,
even though the defective parts were not used in aircraft.
Practice Question 7 — Competitor Price Pressure
From: Agata Paluch, Chief Financial Officer
To: Senior Finance Manager
Subject: FWD: Competitor pricing

Hello,

I have forwarded an email that I received from Ouyang Qi, our Marketing Director.

Breskko, Kwirtmak’s closest competitor, has announced a reduction in the selling price of
several of its commercial 3D printers. Ouyang is concerned that Kwirtmak could lose
customers if it does not respond. However, Kwirtmak has a strong reputation for quality and
technical advice, and its printers are priced to reflect their superior performance.

I need your help with two matters:

● First, evaluate whether Kwirtmak should reduce its prices in response to Breskko’s
pricing strategy.
[sub-task (a) = 50%]

● Second, recommend alternative strategies that Kwirtmak could use to defend its
competitive position without damaging its profit margins.
[sub-task (b) = 50%]

Agata

Sub-task A — Evaluate whether Kwirtmak should reduce

prices
Kwirtmak should not automatically reduce prices in response to Breskko. Kwirtmak’s
printers are positioned as high-quality products, and its pricing reflects superior components
and build quality. A general price cut could damage this premium positioning and make
customers question whether the original prices were too high.

A price cut could help protect market share in the short term. Some customers may be price-
sensitive, especially if they need standard printers and do not require the highest levels of
accuracy or strength. If Breskko’s products are seen as similar, Kwirtmak may lose sales
unless it responds.

However, reducing prices would reduce profit margins. This is a concern because
Kwirtmak’s revenue and profit have already fallen in 2026. If Kwirtmak cuts prices without
increasing sales volume enough, total profit may fall further.
Kwirtmak should also consider whether customers choose its products mainly because of
price or because of quality and support. In sectors such as aerospace, medical and
automotive, customers may value reliability, accuracy and technical advice more than a lower
purchase price. Therefore, a price cut may not be necessary for all markets.

A better approach would be selective pricing. Kwirtmak could offer discounts only for
specific customer segments, older models or strategic accounts. This would help defend
market share without damaging the entire brand.

In conclusion, Kwirtmak should avoid a general price cut. It should defend its premium
positioning and use targeted discounts only where necessary.

Sub-task B — Recommend alternative strategies

Kwirtmak could focus on value-added differentiation. It should emphasise the quality,
reliability and technical support provided with its printers. Customers that use printers for
critical applications may prefer a reliable supplier rather than the cheapest supplier.

Kwirtmak could also offer bundled packages. For example, it could include training,
maintenance, software updates and compatible materials with the printer. This would increase
perceived value without reducing the headline selling price.

Another strategy is to offer financing options. Some customers may find the purchase price
high, but they may be willing to lease the printer or pay in instalments. This would make
Kwirtmak’s printers more affordable without damaging margins as much as a direct price cut.

Kwirtmak could also strengthen customer relationships. Its Marketing Department already
maintains relationships with major customers. Sales staff should speak to key customers to
understand whether Breskko’s price cut is influencing their purchasing decisions.

Kwirtmak could also continue investing in innovation. If it develops advanced printers for
carbon fibre, medical applications or improved sustainability, customers may see Kwirtmak
as technologically superior.

In conclusion, Kwirtmak should compete through quality, service, innovation and flexible
payment terms rather than broad price reductions.
Practice Question 8 — Government Environmental
Regulation
From: Agata Paluch, Chief Financial Officer
To: Senior Finance Manager
Subject: FWD: New environmental rules

Hello,

I have forwarded an email that I received from Madda Fedele, our Non-Executive Chair.

The Ennland Government is considering new environmental regulations for manufacturers of

industrial equipment. These regulations may require 3D printer manufacturers to disclose the
energy consumption and recyclability of materials used in their printers.

Madda has suggested that Kwirtmak should engage with government officials and regulators
before the new rules are finalised.

I need your help with two matters:

● First, evaluate the benefits and risks of Kwirtmak engaging with government officials
and regulators about the proposed environmental regulations.
[sub-task (a) = 50%]

● Second, discuss how the proposed regulations could affect Kwirtmak’s strategy,
operations and sustainability reporting.
[sub-task (b) = 50%]

Agata

Question 8 — Government Environmental

Regulation
Sub-task A — Evaluate benefits and risks of engaging
with government
Engaging with government and regulators could benefit Kwirtmak because it allows the
company to contribute technical knowledge before new environmental rules are finalised. As
a specialist manufacturer of industrial 3D printers, Kwirtmak understands the practical
implications of measuring energy consumption and material recyclability.
Engagement could also help Kwirtmak prepare early. If Kwirtmak understands the likely
direction of regulation, it can adapt its products, systems and reporting before competitors.
This could create a competitive advantage.

There is also a relationship benefit. The pre-seen states that Kwirtmak already engages with
government and regulators to assist in developing realistic sustainability targets. Continuing
this engagement could strengthen trust and show that Kwirtmak is a responsible company.

However, there are risks. If Kwirtmak appears to be lobbying against environmental

regulation, stakeholders may view the company as self-interested. This could damage its
sustainability reputation.

There is also a confidentiality risk. In discussions with regulators or industry groups,

Kwirtmak must avoid disclosing commercially sensitive information about its products, costs
or strategy.

Kwirtmak should therefore engage through formal, transparent consultation processes. It

should support realistic and effective regulation rather than trying to weaken the rules.

Sub-task B — Discuss impact on strategy, operations and

sustainability reporting
The proposed regulations could affect strategy because energy efficiency and recyclability
may become more important buying criteria. Kwirtmak may need to design printers that use
less energy and materials that are easier to recycle. This fits its vision of being a leading
provider of additive manufacturing solutions in a sustainable manner.

Operationally, Kwirtmak may need new testing systems to measure energy consumption for
each printer type and material. It may also need systems to track recyclability data and
provide this information to customers.

The regulations may also affect product development. R&D may need to focus more on
reducing energy use, improving nozzle efficiency, reducing waste and developing more
recyclable materials.

Sustainability reporting would also need to improve. General statements about sustainability
may no longer be enough. Kwirtmak may need to disclose clear metrics, such as energy
consumption per material type, recyclability percentages and improvements over time.

The regulations could increase compliance costs, but they could also create an opportunity. If
Kwirtmak performs better than competitors, it could use environmental performance as a
selling point.

In conclusion, the regulations may create cost and compliance pressure, but they also support
Kwirtmak’s sustainability strategy and could strengthen its competitive position.
Practice Question 9 — Overseas Expansion Proposal
From: Agata Paluch, Chief Financial Officer
To: Senior Finance Manager
Subject: FWD: Overseas factory proposal

Hello,

I have forwarded an email that I received from Kristina Eder, our Operations Director.

Kristina has suggested that Kwirtmak should build a new factory in another country to be
closer to overseas customers. She believes that this would reduce transportation costs, shorten
delivery times and support Kwirtmak’s sustainability claims.

However, Kwirtmak is already exposed to global economic risks, currency movements and
supply chain disruption.

I need your help with two matters:

● First, evaluate the proposal to build an overseas factory using suitability, feasibility
and acceptability.
[sub-task (a) = 60%]

● Second, discuss the treasury and risk management implications of expanding

production overseas.
[sub-task (b) = 40%]

Agata

Question 9 — Overseas Expansion Proposal

Sub-task A — Evaluate using suitability, feasibility and
acceptability
The proposal to build an overseas factory appears suitable because Kwirtmak sells to a
global market. Building closer to overseas customers could reduce delivery times, transport
costs and carbon emissions. This supports Kwirtmak’s sustainability claim that production
closer to the point of use can reduce transportation.

It is also suitable because Kwirtmak already operates factories in more than one country.
Therefore, overseas manufacturing is not completely new to the company. This experience
may help reduce implementation risk.
However, suitability depends on the chosen location. The factory should be located in a
region with strong customer demand, reliable infrastructure and access to skilled labour. If
the location is chosen mainly because of low cost, but lacks technical skills or supply chain
reliability, the strategy may fail.

The proposal may be feasible, but there are financial and operational challenges. Kwirtmak’s
2026 financial performance declined, so a major overseas factory may place pressure on cash
flow. The company also has significant borrowings, so additional debt could increase
financial risk.

Operational feasibility depends on recruiting skilled workers, maintaining quality standards

and managing suppliers. Kwirtmak’s products are complex and quality failure can cause
serious customer problems. Therefore, the new factory must meet the same quality standards
as existing factories.

The proposal may be acceptable to customers because they may benefit from faster delivery,
local support and lower transport costs. Shareholders may accept the proposal if it improves
long-term profitability, but they may be concerned about risk and funding. Employees may
have mixed reactions. Some may see career opportunities, while others may worry that
production will move away from existing factories.

Overall, the proposal is attractive, but Kwirtmak should begin with a smaller overseas
assembly or service facility before committing to a full factory.

Sub-task B — Discuss treasury and risk management

implications
The first treasury issue is foreign exchange risk. An overseas factory may create costs in one
currency and revenues in another. Currency movements could affect profit and cash flow.
Kwirtmak’s financial statements already show a currency reserve, indicating that currency
movements affect the group.

Kwirtmak should manage this using natural hedging where possible. For example, it could
match local currency costs with local currency revenues. It could also use forward contracts
to hedge major currency exposures.

The second issue is funding risk. The factory may require major investment. If funded by
debt, interest costs and gearing may increase. If funded by equity, existing shareholders may
be diluted. The Board must compare funding options carefully.

The third issue is political and legal risk. The overseas country may have different tax rules,
labour laws, environmental regulations and import/export rules. Kwirtmak should carry out
country risk analysis before choosing the location.

The fourth issue is supply chain risk. The new factory may depend on local suppliers. If
supplier quality is poor, Kwirtmak’s products may be defective. Supplier audits and quality
agreements will be necessary.
In conclusion, overseas expansion should be phased, supported by treasury hedging and
controlled through strong risk management.

Practice Question 10 — Customer Material Subscription

Model
From: Agata Paluch, Chief Financial Officer
To: Senior Finance Manager
Subject: FWD: Materials subscription proposal

Hello,

I have forwarded an email that I received from Ouyang Qi, our Marketing Director.

Ouyang has suggested that Kwirtmak should introduce a subscription model for 3D printing
materials. Customers would pay a monthly fee and receive regular deliveries of compatible
materials such as PLA, ABS, nylon, metals and ceramics.

Ouyang believes that this would create recurring revenue and strengthen customer loyalty.
However, it may also create inventory, logistics and customer service challenges.

I need your help with two matters:

● First, evaluate the strategic and financial benefits of introducing a materials

subscription model.
[sub-task (a) = 50%]

● Second, discuss the operational risks and controls needed to manage the subscription
model effectively.
[sub-task (b) = 50%]

Agata

A materials subscription model could be strategically beneficial because it would create

recurring revenue. Kwirtmak currently sells printers and also supplies materials, but
customers are not required to buy those materials from Kwirtmak. A subscription model
could encourage customers to buy compatible materials regularly.

This could reduce earnings volatility. The pre-seen identifies volatile sales demand as a
principal risk. Printer sales may be irregular because customers do not buy expensive printers
frequently. In contrast, materials are consumed continuously as customers print objects.
Therefore, subscription revenue may be more predictable.
The model could also increase customer loyalty. If customers receive regular deliveries of
Kwirtmak-approved materials, they may be less likely to switch to Breskko or other
suppliers. This could strengthen customer relationships.

There may also be quality benefits. Kwirtmak’s materials are known to be compatible with its
printers. If customers use approved materials, they are more likely to achieve good output
quality. This could reduce complaints caused by customers using unsuitable third-party
materials.

Financially, the subscription model could improve cash flow predictability. Monthly
subscription fees may make revenue easier to forecast. It could also increase lifetime
customer value, because Kwirtmak earns revenue after the initial printer sale.

However, the model may create additional costs. Kwirtmak would need inventory
management, logistics, customer service and billing systems. If these are not well managed,
the model could reduce profit.

Overall, the subscription model is attractive because it supports recurring revenue, customer
loyalty and quality control.

Sub-task B — Discuss operational risks and controls

The first risk is inventory risk. Kwirtmak may hold too much inventory if customer demand
is lower than expected. Some materials may also become obsolete if customers change printer
types or applications.

Kwirtmak should manage this through demand forecasting, minimum and maximum
inventory levels, and regular review of slow-moving materials.

The second risk is logistics risk. Customers may depend on regular material deliveries for
their own production. If Kwirtmak delivers late, customers may suffer disruption and lose
confidence.

Kwirtmak should use reliable logistics partners, delivery tracking and service level
agreements. It should also hold safety stock for high-demand materials.

The third risk is quality risk. Defective materials could damage printers or produce poor
quality output. This would harm Kwirtmak’s reputation.

Kwirtmak should test all material batches, approve suppliers carefully and maintain
traceability so that defective batches can be identified and recalled.

The fourth risk is customer service risk. Customers may want to change subscription
quantities, pause deliveries or switch materials. If the process is difficult, customer
satisfaction may fall.

Kwirtmak should create a clear subscription platform that allows customers to manage orders
easily.
The fifth risk is financial control risk. Subscription billing may create errors, disputes or
unpaid balances. Kwirtmak should use automated billing, credit checks and regular
reconciliation of subscription income.

In conclusion, the subscription model should be introduced, but only after Kwirtmak has
strong inventory, logistics, quality and billing controls.

F3 Question 1 — Rights Issue to Fund New

Factory
Exam-style question
From: Agata Paluch, Chief Financial Officer
To: Senior Finance Manager
Subject: FWD: Funding new laser melting factory

Hello,

I have forwarded an email from David Wallace, our CEO.

David is proposing that Kwirtmak builds a new factory in Ennland to increase production
capacity for laser melting and material jetting printers. The estimated cost is E$450 million.
David has suggested that this should be financed through a rights issue.

I need your help with two matters:

● First, evaluate whether a rights issue would be an appropriate method of financing

the new factory.
[sub-task (a) = 50%]

● Second, discuss the impact of the proposed rights issue on shareholder value and
Kwirtmak’s financial risk.
[sub-task (b) = 50%]

Agata

Answer (a) — Evaluate whether a rights issue would be

appropriate
A rights issue could be an appropriate financing method for Kwirtmak because it is a quoted
company and therefore has access to equity markets. A rights issue gives existing
shareholders the right to buy new shares in proportion to their existing shareholding. This
means existing shareholders can avoid dilution if they take up their rights.
This is suitable for Kwirtmak because the proposed factory requires a large amount of
funding, E$450 million. If Kwirtmak uses a rights issue, it can raise long-term finance
without increasing its fixed interest obligations. This is important because the factory may
take time to become operational and generate cash flows. Equity finance gives the company
more flexibility than debt during the early stages of the project.

A rights issue may also be preferable to debt because Kwirtmak already has E$1,350 million
of borrowings. If the company borrows more to fund the factory, gearing will increase and
lenders may become concerned about the company’s ability to service additional debt. This is
especially important because Kwirtmak’s profit has fallen in 2026. A rights issue avoids
increasing debt and therefore reduces pressure on cash flow.

However, there are disadvantages. A rights issue may be difficult if investor confidence is
weak. Kwirtmak’s revenue and profit have declined, while its closest competitor, Breskko,
has performed better. Shareholders may question whether the new factory is a good use of
funds. Therefore, the Board must provide a strong business case, including expected sales,
NPV, payback period and strategic benefits.

The rights issue should also be priced carefully. It should be offered at a discount to the
current market price to encourage shareholders to subscribe. However, if the discount is too
deep, it may send a negative signal that Kwirtmak is desperate for cash.

Kwirtmak should also consider underwriting the issue. This would ensure that the company
raises the full E$450 million even if some shareholders do not take up their rights. The
disadvantage is that underwriting fees will increase the cost of the fundraising.

Conclusion for (a):

A rights issue is an appropriate method because it avoids increasing debt and supports long-
term investment. However, it should only proceed if the factory has a strong positive
investment case and the issue is clearly communicated to shareholders.

Answer (b) — Impact on shareholder value and financial

risk
The rights issue could increase shareholder value if the new factory generates returns above
Kwirtmak’s cost of capital. The factory would increase capacity for laser melting and
material jetting printers, which are advanced technologies capable of producing strong,
accurate and complex parts. If demand is strong, the factory could help Kwirtmak increase
revenue, improve competitiveness and recover from its recent decline in performance.

However, shareholder value could be damaged if the factory does not generate sufficient
returns. Kwirtmak’s sales demand is already described as volatile in the pre-seen. If demand
does not materialise, Kwirtmak may have excess capacity, higher fixed costs and lower asset
utilisation. This would reduce profitability and could reduce shareholder value.

The rights issue may also affect shareholders through dilution. Shareholders who do not take
up their rights will own a smaller percentage of the company. Their future share of dividends
and voting power will reduce. However, shareholders who take up their rights can maintain
their ownership percentage.

The impact on share price may also be significant. Kwirtmak’s beta is 2.3, which indicates
that its shares are highly sensitive to market movements. A rights issue could be viewed
positively if investors believe the factory will create future growth. However, it could be
viewed negatively if investors believe the company is raising funds because its current
financial performance is weak.

In terms of financial risk, a rights issue reduces risk compared with debt financing. Equity
does not require fixed interest payments, and there is no repayment date. This is important
because Kwirtmak already has significant borrowings and declining profit. Using equity
therefore protects liquidity and reduces the risk of financial distress.

However, equity finance has a higher required return than debt because shareholders take
more risk. Therefore, the factory must generate sufficient returns to justify the cost of equity.

Conclusion for (b):

The rights issue could support shareholder value if the new factory produces returns above
the cost of capital. It also reduces financial risk compared with debt. However, shareholder
value will be destroyed if the project is poorly appraised, over-optimistic or fails to generate
expected demand.

F3 Question 2 — Dividend Policy After

Falling Profit
Exam-style question
From: Agata Paluch, Chief Financial Officer
To: Senior Finance Manager
Subject: FWD: Dividend decision

Hello,

I have forwarded an email from Madda Fedele, our Non-Executive Chair.

Madda is concerned that Kwirtmak’s profit has fallen in 2026. Some directors believe that the
dividend should be maintained to reassure shareholders. Others believe that the dividend
should be reduced so that cash can be retained for research and new printer technology.

I need your help with two matters:

● First, evaluate whether Kwirtmak should maintain or reduce its dividend.

[sub-task (a) = 50%]
● Second, discuss how Kwirtmak’s dividend decision may affect shareholder confidence
and share price.
[sub-task (b) = 50%]

Agata

Answer (a) — Evaluate whether Kwirtmak should

maintain or reduce its dividend
Kwirtmak should evaluate its dividend policy based on affordability, future investment needs
and shareholder expectations. In 2026, Kwirtmak paid a dividend of E$432.2 million, while
profit for the year was E$810.6 million. This means the dividend was covered by profit.
However, profit has fallen from E$1,142.4 million in 2025, so the Board should consider
whether maintaining the same dividend is sustainable.

One argument for maintaining the dividend is that it may reassure shareholders. A stable
dividend can signal that the Board believes the fall in profit is temporary. This may be
important because Kwirtmak’s share price is volatile, and shareholders may already be
concerned about the company’s performance compared with Breskko.

However, maintaining the dividend may not be wise if Kwirtmak needs to invest heavily in
new technology. Kwirtmak operates in a technology-based industry where research and
development are essential. If the company pays out too much cash, it may not have enough
retained earnings to fund future growth projects such as carbon fibre printers, medical
printers, sustainability improvements or new factory capacity.

Reducing the dividend could allow Kwirtmak to retain cash for investment. This may be
better for long-term shareholder value if the retained funds are invested in positive NPV
projects. However, a dividend cut may disappoint income-focused shareholders.

Kwirtmak should not cut the dividend without explanation. The Board should explain that the
reduction is intended to fund innovation and protect future competitiveness. This would make
the decision more acceptable.

Conclusion for (a):

Kwirtmak should consider a moderate dividend reduction or dividend freeze rather than
maintaining a high payout. This would balance shareholder expectations with the need to
retain cash for long-term investment.

Answer (b) — Impact on shareholder confidence and

share price
The dividend decision could have a strong impact on shareholder confidence because
dividends often act as a signal to the market. If Kwirtmak maintains its dividend despite
falling profit, shareholders may interpret this as a sign that the Board is confident about future
cash flows. This could support the share price in the short term.

However, maintaining the dividend could also create concern if investors believe it is
financially irresponsible. If profit continues to fall, maintaining high dividends may weaken
cash reserves or force Kwirtmak to borrow more. This would increase financial risk and may
damage long-term shareholder confidence.

If Kwirtmak reduces the dividend, the market may initially react negatively. Under signalling
theory, a dividend cut can be interpreted as a sign that management expects weaker future
performance. This could cause the share price to fall, especially because Kwirtmak’s shares
are already volatile and its beta is high.

However, the impact depends on how the decision is communicated. If Kwirtmak clearly
explains that the dividend reduction is to fund high-return projects and strengthen
competitiveness, shareholders may accept it. Growth-focused investors may prefer
reinvestment if it creates greater long-term value.

The efficient market hypothesis is also relevant. If the market is semi-strong efficient, the
share price will quickly reflect the information contained in the dividend announcement. If
the announcement simply confirms what investors already expected due to falling profits, the
share price reaction may be limited. However, if the dividend cut is unexpected, the reaction
may be stronger.

Conclusion for (b):

A dividend reduction may harm confidence in the short term, but it can support long-term
shareholder value if the retained cash is invested wisely. Clear communication is essential to
reduce negative market reaction.

F3 Question 3 — Acquisition of 3D
Scanning Company
Exam-style question
From: Agata Paluch, Chief Financial Officer
To: Senior Finance Manager
Subject: FWD: Proposed acquisition of ScanBuild

Hello,

I have forwarded an email from David Wallace, our CEO.

David is considering the acquisition of ScanBuild, a small technology company that develops
high-definition 3D scanners and CAD software. The technology would allow customers to
scan existing parts, edit the design and print replacement components using Kwirtmak
printers.

I need your help with two matters:

● First, evaluate the financial factors that should be considered before acquiring
ScanBuild.
[sub-task (a) = 50%]

● Second, discuss how the acquisition could create or destroy shareholder value.
[sub-task (b) = 50%]

Agata

Answer (a) — Financial factors to consider before

acquiring ScanBuild
Kwirtmak should first consider the valuation of ScanBuild. The acquisition price should be
based on expected future benefits, not simply on what the seller wants. Since ScanBuild is a
technology company, a discounted cash flow valuation may be useful because much of its
value may come from future growth.

Kwirtmak should forecast future cash flows from scanner sales, software licences,
maintenance contracts and possible cross-selling. The acquisition could increase sales of
Kwirtmak printers because customers may prefer a complete solution involving scanning,
CAD editing, printing and compatible materials.

However, Kwirtmak must be careful not to overestimate synergies. Acquisitions often

destroy value when the buyer pays too much for expected benefits that do not happen. For
example, not all ScanBuild customers may switch to Kwirtmak printers, and not all
Kwirtmak customers may need scanners.

The method of financing is also important. If Kwirtmak uses debt, gearing and finance costs
will increase. This may be risky because Kwirtmak already has E$1,350 million of
borrowings. If Kwirtmak uses shares, existing shareholders may suffer dilution. If Kwirtmak
uses cash, liquidity may reduce.

Kwirtmak should also consider integration costs. These may include software integration,
staff retention bonuses, rebranding costs, legal fees and system changes. If these costs are
ignored, the acquisition may appear more attractive than it really is.

The company should also consider the impact on reported financial statements. If Kwirtmak
pays more than the fair value of ScanBuild’s identifiable net assets, goodwill will be
recognised. If the acquisition performs poorly, goodwill impairment may reduce future profit.

Conclusion for (a):

Kwirtmak should acquire ScanBuild only if the valuation is reasonable, the expected
synergies are realistic, financing is affordable and the acquisition is expected to generate
returns above the cost of capital.

Answer (b) — How the acquisition could create or destroy

shareholder value
The acquisition could create shareholder value if it strengthens Kwirtmak’s competitive
advantage. The pre-seen explains that 3D scanning can speed up the design process because
an object can be scanned and edited in CAD software before printing. This fits Kwirtmak’s
business because it already sells commercial 3D printers and materials.

ScanBuild could allow Kwirtmak to offer a more complete customer solution. Customers
could scan existing parts, modify them, print the replacement component and use Kwirtmak-
approved materials. This may increase customer loyalty and make it harder for competitors
such as Breskko to win customers.

The acquisition could also create value through cross-selling. Kwirtmak could sell scanners
to existing printer customers, and ScanBuild’s customers could be encouraged to buy
Kwirtmak printers. This could increase revenue and improve margins.

However, the acquisition could destroy value if Kwirtmak overpays. If the purchase price
includes unrealistic synergy expectations, shareholders may not earn an adequate return. This
is especially risky because Kwirtmak’s financial performance has already declined, so
investors may be concerned about management making a large acquisition.

Value could also be destroyed if integration fails. ScanBuild’s software may not work
smoothly with Kwirtmak’s printers or customers’ CAD systems. If customers experience
technical issues, Kwirtmak’s reputation may be damaged.

There is also a risk that key ScanBuild employees leave after the acquisition. Since
ScanBuild is a technology company, much of its value may depend on its engineers and
software developers. If those employees leave, Kwirtmak may not gain the knowledge and
innovation it expected.

Conclusion for (b):

The acquisition could create shareholder value if it gives Kwirtmak stronger technology,
cross-selling opportunities and customer loyalty. However, it could destroy value if
Kwirtmak overpays, fails to integrate the business or loses key staff.

F3 Question 4 — Foreign Exchange and

Treasury Risk
Exam-style question
From: Agata Paluch, Chief Financial Officer
To: Senior Finance Manager
Subject: FWD: Overseas factory proposal

Hello,

I have forwarded an email from Kristina Eder, our Operations Director.

Kristina has suggested that Kwirtmak should build a new factory overseas to be closer to
international customers. This may reduce transport costs and improve delivery times.
However, the factory would create more foreign currency transactions.

I need your help with two matters:

● First, evaluate the foreign exchange risks that may arise from the proposed overseas
factory.
[sub-task (a) = 50%]

● Second, recommend how Kwirtmak’s treasury function should manage these risks.
[sub-task (b) = 50%]

Agata

Answer (a) — Evaluate the foreign exchange risks

The proposed overseas factory would increase Kwirtmak’s foreign exchange risk because the
company would have more costs, revenues, assets and liabilities in foreign currencies.
Kwirtmak already sells globally, so this risk is relevant to its existing business.

The first risk is transaction risk. This arises when foreign currency cash flows are settled at a
later date. For example, the overseas factory may pay local suppliers and employees in a
foreign currency. It may also sell printers to customers in that region. If exchange rates move
between invoice date and payment date, Kwirtmak’s cash flow in E$ terms may be affected.

The second risk is translation risk. The overseas factory’s assets, liabilities, income and
expenses will need to be translated into E$ for group reporting. If the foreign currency
weakens, the translated value of overseas profits and net assets may fall. This could affect
reported equity and investor perception.

The third risk is economic risk. This is the long-term risk that exchange rate movements
affect Kwirtmak’s competitiveness. If the overseas currency strengthens, products
manufactured in that country may become more expensive compared with competitors’
products. This may reduce sales or margins.
Foreign exchange risk may also affect investment appraisal. If the new factory’s future cash
flows are in a foreign currency, exchange rate assumptions will affect the NPV. If these
assumptions are too optimistic, the Board may approve a project that later fails to create
value.

Conclusion for (a):

The overseas factory increases transaction, translation and economic foreign exchange risk.
These risks could affect cash flow, reported profits and shareholder value.

Answer (b) — Recommend how treasury should manage

the risks
Kwirtmak’s treasury function should first create a clear treasury policy approved by the
Board. This policy should state which risks should be hedged, what financial instruments
may be used and who has authority to enter into treasury contracts.

Kwirtmak should use natural hedging where possible. This means matching foreign currency
revenues with foreign currency costs. For example, if the overseas factory sells to local
customers and pays local suppliers in the same currency, the exposure is reduced naturally.
This is often cheaper and simpler than using financial derivatives.

For significant transaction exposures, Kwirtmak could use forward contracts. A forward
contract allows the company to lock in an exchange rate for a future receipt or payment. This
gives certainty and helps protect margins.

Kwirtmak could also use currency options where flexibility is needed. Options allow the
company to protect against adverse exchange rate movements while still benefiting from
favourable movements. However, options require a premium, so they may be more expensive
than forwards.

The treasury function should also prepare regular foreign exchange exposure reports for the
CFO and Board. These reports should show forecast foreign currency receipts, payments,
assets and liabilities. This is important because Kwirtmak’s principal risks include exposure
to global economic trends.

For translation risk, Kwirtmak may not need to hedge all exposures because translation gains
and losses may not involve immediate cash flows. However, if the overseas factory is large,
the Board may consider hedging net investments using foreign currency borrowings.

Conclusion for (b):

Kwirtmak should manage foreign exchange risk using a combination of natural hedging,
forward contracts, currency options where appropriate, regular exposure reporting and Board-
approved treasury policies.
F3 Question 5 — Cost of Capital and
Investment Appraisal
Exam-style question
From: Agata Paluch, Chief Financial Officer
To: Senior Finance Manager
Subject: FWD: Investment appraisal for new printer technology

Hello,

I have forwarded an email from Dr Said Abouchdak, our CTO.

Said is proposing a major investment in a new printer technology that could improve the
strength and accuracy of printed components. The project will require significant research
and development expenditure.

I need your help with two matters:

● First, discuss why Kwirtmak should use an appropriate cost of capital when
appraising this investment.
[sub-task (a) = 50%]

● Second, evaluate the factors that may cause Kwirtmak’s cost of capital to be high.
[sub-task (b) = 50%]

Agata

Answer (a) — Why Kwirtmak should use an appropriate

cost of capital
Kwirtmak should use an appropriate cost of capital because it represents the minimum return
required by investors and lenders. If the new printer technology generates a return below the
cost of capital, it will destroy shareholder value. If it generates a return above the cost of
capital, it should create shareholder value.

The cost of capital is especially important when using net present value. Future cash flows
from the new printer technology should be discounted to present value. This helps the Board
compare the value of future benefits with the investment required today.

Kwirtmak should not automatically use its existing weighted average cost of capital if the
project has a different risk profile from the existing business. For example, a routine
replacement of existing equipment may have lower risk. However, a new printer technology
may involve technical uncertainty, customer acceptance risk and possible quality failure.
Therefore, the project may require a higher risk-adjusted discount rate.

Using too low a discount rate may make the project look more attractive than it really is. This
could lead Kwirtmak to accept a project that destroys value. Using too high a discount rate
may cause Kwirtmak to reject a good project. Therefore, selecting the correct cost of capital
is essential for good strategic decision-making.

The cost of capital also helps Kwirtmak compare competing projects. For example, the Board
may need to choose between investing in carbon fibre printing, medical printing, a new
factory or sustainability improvements. A consistent appraisal approach helps allocate capital
to the projects with the best value creation potential.

Conclusion for (a):

Kwirtmak should use a risk-adjusted cost of capital because it helps ensure that only projects
expected to create shareholder value are accepted.

Answer (b) — Factors that may cause Kwirtmak’s cost of

capital to be high
Kwirtmak’s cost of capital may be high because its beta is 2.3. Beta measures the sensitivity
of a company’s share price to market movements. A beta above 1 means the shares are riskier
than the market average. A beta of 2.3 suggests that equity investors will require a high return
to compensate for the higher risk. This increases Kwirtmak’s cost of equity.

Kwirtmak’s declining financial performance may also increase its cost of capital. Revenue
and profit fell in 2026. Investors may see this as a sign of weaker competitiveness, especially
because Breskko performed strongly. If investors believe Kwirtmak’s future cash flows are
uncertain, they will require a higher return.

Kwirtmak also operates in a technology-driven industry. 3D printing involves rapid

innovation, quality risk and possible technological obsolescence. Products can be complex,
involving hardware and software, and failures can cause serious customer problems. This
business risk increases the return required by investors.

Financial risk is another factor. Kwirtmak has E$1,350 million of borrowings. Debt can be
cheaper than equity, but too much debt increases the risk to shareholders because interest
payments must be made regardless of profit level. This may increase the cost of equity and
possibly the cost of debt if lenders become concerned.

Global operations may also increase the cost of capital. Kwirtmak sells to a global market and
is exposed to foreign economic conditions and currency movements. This creates uncertainty
in cash flows, which can increase risk.

The project itself may also affect the discount rate. If the new printer technology is aimed at
safety-critical industries such as aerospace or medical applications, the risk may be higher
than existing business. Therefore, a project-specific risk premium may be needed.
Conclusion for (b):
Kwirtmak’s cost of capital may be high because of its high beta, declining profit,
technological risk, existing borrowings and global exposure. Therefore, investment appraisal
should use a risk-adjusted discount rate.

F3 Question 6 — Share Price Volatility and

Efficient Market Hypothesis
Exam-style question
From: Agata Paluch, Chief Financial Officer
To: Senior Finance Manager
Subject: FWD: Share price concerns

Hello,

I have forwarded an email from Madda Fedele, our Non-Executive Chair.

Madda is concerned that Kwirtmak’s share price has been volatile and appears to have fallen
significantly. She has asked whether the Board should issue a public statement explaining
that Kwirtmak’s long-term strategy remains strong.

I need your help with two matters:

● First, discuss possible reasons for the volatility in Kwirtmak’s share price.
[sub-task (a) = 50%]

● Second, evaluate whether issuing a public statement is likely to affect the share price,
using the efficient market hypothesis.
[sub-task (b) = 50%]

Agata

Answer (a) — Possible reasons for share price volatility

Kwirtmak’s share price may be volatile because the company has a beta of 2.3. This means
the share price is expected to move more than the overall market. If market conditions
change, Kwirtmak’s share price may rise or fall more sharply than lower-risk companies.

Another reason is the decline in financial performance. Kwirtmak’s revenue fell from
E$2,856.6 million to E$2,320.0 million, while profit fell from E$1,142.4 million to E$810.6
million. Investors may interpret this as a sign that demand is weakening or that Kwirtmak is
losing competitiveness.
Competition from Breskko may also affect the share price. Breskko is Kwirtmak’s closest
competitor and reported stronger performance. Investors may compare the two companies
and decide that Breskko is better positioned. This could reduce demand for Kwirtmak shares.

The 3D printing industry also involves high business risk. Kwirtmak’s products are complex,
require ongoing R&D and may become outdated if competitors innovate faster. Investors
may therefore be uncertain about future cash flows.

Kwirtmak’s global exposure may also contribute to volatility. The company sells to global
markets and is affected by economic trends, interest rates, exchange rates and international
customer demand.

Conclusion for (a):

Kwirtmak’s share price volatility is likely caused by its high beta, falling profit, competitor
pressure, technology risk and global economic exposure.

Answer (b) — Whether a public statement would affect

share price using EMH
The efficient market hypothesis states that share prices reflect available information. In a
semi-strong efficient market, share prices adjust quickly to all publicly available information.
Since Ennland has an active and well-regulated stock exchange, it is reasonable to assume
that the market may be semi-strong efficient.

If Kwirtmak issues a public statement that contains no new information, the share price may
not change significantly. For example, simply saying that the long-term strategy remains
strong may not affect the share price because investors may already know the strategy from
the annual report and previous announcements.

However, if the statement contains credible new information, the share price may react. For
example, if Kwirtmak announces confirmed new customer contracts, successful development
of new technology, cost savings or a positive trading update, investors may revise their
expectations. Under semi-strong EMH, this new information would be reflected in the share
price quickly.

The Board must be careful not to issue vague or overly optimistic statements. If the statement
is not supported by evidence, investors may ignore it. Worse, if the statement is misleading,
Kwirtmak may damage trust and face regulatory consequences.

A public statement may also create signalling effects. If the Board issues a statement only
because the share price is falling, investors may interpret this as a sign that management is
worried. This could have the opposite effect and increase concern.

Conclusion for (b):

A public statement will only affect the share price if it contains credible new information.
Kwirtmak should communicate transparently, but it should not issue a statement merely to
support the share price.
F3 Question 7 — Debt Finance for
Sustainability R&D
Exam-style question
From: Agata Paluch, Chief Financial Officer
To: Senior Finance Manager
Subject: FWD: Debt funding for R&D

Hello,

I have forwarded an email from Dr Said Abouchdak, our CTO.

Said has requested additional funding for research into a new generation of printers that use
less energy and can process more recyclable materials. One director has suggested funding
this through additional long-term debt.

I need your help with two matters:

● First, evaluate the advantages and disadvantages of using debt finance for this R&D
project.
[sub-task (a) = 50%]

● Second, recommend whether Kwirtmak should use debt finance for this project.
[sub-task (b) = 50%]

Agata

Answer (a) — Advantages and disadvantages of debt

finance
Debt finance has several advantages. First, it is usually cheaper than equity because lenders
take less risk than shareholders. Interest payments may also be tax deductible, which can
reduce the effective cost of debt. This could make debt attractive if Kwirtmak wants to fund
sustainability-related R&D at a lower financing cost.

Debt also avoids ownership dilution. If Kwirtmak raises new shares, existing shareholders
may suffer dilution unless they participate. Debt allows the company to raise finance without
changing control.
Debt may also be appropriate if the R&D project supports future growth. Printers that use less
energy and more recyclable materials could support Kwirtmak’s sustainability strategy and
may be attractive to customers who want lower environmental impact.

However, there are important disadvantages. Kwirtmak already has E$1,350 million of
borrowings. Additional debt would increase gearing and financial risk. This is a concern
because profit has declined, meaning there may be less comfort in meeting additional interest
payments.

Debt creates fixed obligations. Interest must be paid even if the R&D project fails. This is
risky because R&D projects are uncertain and may not generate cash inflows for several
years. If the technology cannot be commercialised, Kwirtmak will still need to repay the debt.

Debt may also create covenant restrictions. Lenders may impose limits on dividends, further
borrowing or investment decisions. This could reduce Kwirtmak’s strategic flexibility.

Conclusion for (a):

Debt is cheaper and avoids dilution, but it may not be suitable for uncertain early-stage R&D
because it increases fixed financial obligations and financial risk.

Answer (b) — Recommendation on whether to use debt

finance
Kwirtmak should not fund the entire R&D project using additional long-term debt. The
project is uncertain because it involves new technology, and the commercial benefits may not
be known until testing and customer trials are complete. Using debt at this early stage would
increase financial risk without guaranteed cash inflows.

A better approach would be staged funding. Kwirtmak could fund the early research phase
using retained earnings or its existing R&D budget. This would allow the company to explore
the technology without committing to large fixed interest payments.

If the research phase is successful and the technology becomes commercially viable,
Kwirtmak could then consider debt finance for the production stage. At that point, the risk
would be lower because the company would have more evidence of customer demand and
expected cash flows.

Kwirtmak could also consider alternative funding sources. For example, it may seek
government sustainability grants or collaborate with customers who are willing to contribute
to development costs. This could reduce the amount of debt required.

The Board should also ensure that the project is appraised using a risk-adjusted cost of
capital. Since sustainability technology may have strategic benefits but uncertain financial
returns, both financial and non-financial benefits should be considered.

Conclusion for (b):

Kwirtmak should not rely mainly on debt for early-stage R&D. It should use staged funding
from retained earnings or grants first, and only use debt later if the project becomes
commercially proven.

F3 Question 8 — Shareholder Value and

Competitor Performance
Exam-style question
From: Agata Paluch, Chief Financial Officer
To: Senior Finance Manager
Subject: FWD: Comparison with Breskko

Hello,

I have forwarded an email from David Wallace, our CEO.

David is concerned that Breskko, Kwirtmak’s closest competitor, has reported stronger
financial performance in 2026. Some shareholders have asked what the Board will do to
improve shareholder value.

I need your help with two matters:

● First, evaluate the financial performance issues that may concern Kwirtmak’s
shareholders.
[sub-task (a) = 50%]

● Second, recommend actions that Kwirtmak could take to improve shareholder value.
[sub-task (b) = 50%]

Agata

Answer (a) — Financial performance issues concerning

shareholders
Shareholders may be concerned that Kwirtmak’s revenue has fallen significantly. Revenue
decreased from E$2,856.6 million in 2025 to E$2,320.0 million in 2026. This may suggest
weaker customer demand, loss of market share or competitive pressure.

Profit has also fallen from E$1,142.4 million to E$810.6 million. This decline may worry
shareholders because lower profit can affect dividends, retained earnings and future
investment capacity.
Shareholders may also compare Kwirtmak with Breskko. Breskko is Kwirtmak’s closest
competitor and appears to have performed better in 2026. This may make investors question
whether Kwirtmak’s strategy is strong enough.

Kwirtmak’s share price volatility is another concern. With a beta of 2.3, shareholders face a
high level of market risk. If financial performance continues to weaken, the share price may
become even more volatile.

The company’s borrowings may also concern shareholders. Kwirtmak has E$1,350 million
of borrowings. Although the company remains profitable, falling profit reduces the comfort
level for interest payments and future debt capacity.

Conclusion for (a):

Shareholders are likely to be concerned about falling revenue, falling profit, competitor
performance, high beta and existing borrowings.

Answer (b) — Actions to improve shareholder value

Kwirtmak should focus on projects that generate returns above the cost of capital. This means
using NPV analysis for major investments such as new factories, acquisitions or new printer
technology. Projects should not be approved simply because they appear strategically
attractive.

Kwirtmak should also strengthen its competitive differentiation. Rather than competing
mainly on price with Breskko, it should focus on quality, technical advice, advanced printers
and sustainability benefits. This supports its premium positioning and may protect margins.

The company could also develop recurring revenue streams. For example, a materials
subscription model could create more predictable income from PLA, ABS, nylon, metals and
ceramics. This may reduce earnings volatility and improve investor confidence.

Kwirtmak should also review costs carefully. Since revenue has fallen, management should
ensure that selling, administration and research spending are efficient. However, it should not
cut R&D too aggressively because innovation is essential in the 3D printing industry.

The Board should also improve communication with shareholders. Investors need to
understand how Kwirtmak plans to respond to Breskko and recover performance. Clear
communication may reduce uncertainty and support the share price.

Finally, Kwirtmak should manage financial risk. It should avoid excessive new borrowing
and consider retaining more earnings if major investment is needed.

Conclusion for (b):

Kwirtmak can improve shareholder value by investing only in positive NPV projects,
protecting margins, building recurring revenue, controlling costs, communicating clearly and
managing gearing carefully.
Question 1 — Demand from Aerospace
Customers
Exam-style question
From: Agata Paluch, Chief Financial Officer
To: Senior Finance Manager
Subject: FWD: Demand from aerospace customers

Hello,

I have forwarded a news article that has just gone online.

The article states that several major aerospace companies are reducing their purchases of
commercial 3D printers. Instead, they are considering developing their own in-house 3D
printing technology to produce spare parts at airports around the world.

This is a serious matter because aerospace customers are one of Kwirtmak’s important
customer groups. The Board will meet tomorrow to discuss the possible impact on Kwirtmak.

I need your help with two matters:

● Firstly, identify and evaluate the challenges associated with understanding and
managing the ecosystem within which Kwirtmak operates.
[sub-task (a) = 60%]

● Secondly, explain how Kwirtmak might benefit from applying scenario planning to
the possibility that aerospace customers will continue to reduce their purchases from
Kwirtmak.
[sub-task (b) = 40%]

Agata

Answer (a) — Challenges associated with understanding

and managing Kwirtmak’s ecosystem
Kwirtmak operates in a complex ecosystem because it is not just selling printers to individual
customers. It is part of a wider network involving customers, suppliers, competitors,
regulators, software developers, material suppliers and end users. This makes strategic
decision-making difficult because a change in one part of the ecosystem can affect many
other parties.
One major challenge is understanding customer behaviour. Aerospace customers use 3D
printers to create spare parts at airports so that aircraft repairs can be completed faster. If
these customers now decide to develop their own in-house 3D printing capability, Kwirtmak
may lose printer sales, materials revenue and maintenance income. This is important because
Kwirtmak’s principal risks already include volatility in sales demand. If a major customer
group reduces demand, Kwirtmak’s revenue and profits could fall further.

Another challenge is that customers may also become competitors. If aerospace companies
develop their own printing technology, they may no longer depend on Kwirtmak. They may
even develop technology that could later be sold to other businesses. This changes the
relationship from supplier-customer to potential competitor. Kwirtmak must therefore
monitor not only existing 3D printer manufacturers such as Breskko, but also large customers
that may vertically integrate.

Kwirtmak also depends on suppliers of parts and materials. If aerospace customers reduce
demand, Kwirtmak may reduce orders from its own suppliers. This could weaken supplier
relationships or reduce Kwirtmak’s purchasing power. On the other hand, if Kwirtmak
develops more advanced aerospace printers, it may need higher-quality components and
specialist materials. Supplier quality is critical because defects in aerospace components
could have serious safety consequences.

Another ecosystem challenge is regulation. Aerospace is a safety-critical industry. If parts

printed using Kwirtmak machines fail, the consequences could be serious. Therefore,
regulators, certification bodies and quality standards all form part of Kwirtmak’s ecosystem.
Kwirtmak cannot simply focus on selling printers; it must also ensure that customers can use
those printers safely and reliably.

Technology change is also difficult to manage. 3D printing is an innovative and fast-changing

industry. Customers may demand printers that are faster, more accurate, stronger and more
sustainable. Kwirtmak must keep investing in research and development, but it cannot be
certain which technology customers will prefer in the future. For example, aerospace
customers may prefer laser melting because it can create stronger metal objects, but other
customers may prefer material jetting for accuracy and finish.

Competitor behaviour is another challenge. Breskko is Kwirtmak’s closest competitor and

produces a similar range of printers and materials. If Breskko responds faster to aerospace
demand or offers lower prices, Kwirtmak may lose customers. Therefore, Kwirtmak must
manage its ecosystem by monitoring competitor actions as well as customer needs.

Kwirtmak also has to manage its reputation within the ecosystem. Aerospace customers are
likely to value reliability, safety and technical support. If Kwirtmak is seen as slow to
respond to changing customer needs, or if product quality problems arise, customers may lose
confidence. This could affect not only aerospace sales but also sales to automotive, medical
and other high-value sectors.

Overall, Kwirtmak’s ecosystem is difficult to manage because it is affected by customer

strategy, supplier reliability, competitor action, regulation, technology development and
reputation. Kwirtmak should respond by strengthening customer relationships, monitoring
market trends, investing in R&D and maintaining high quality standards.
Answer (b) — Benefits of scenario planning
Scenario planning would help Kwirtmak because the future demand from aerospace
customers is uncertain. Instead of assuming that demand will recover or collapse, the Board
can consider several possible futures and prepare responses for each one.

One possible scenario is that aerospace customers only reduce purchases temporarily. In this
case, Kwirtmak may not need to change its strategy significantly. It may focus on
maintaining customer relationships, offering technical support and waiting for demand to
recover. This would avoid overreacting to short-term market changes.

A second scenario is that aerospace customers permanently reduce printer purchases because
they develop their own technology. If this happens, Kwirtmak may need to replace lost
revenue by targeting other sectors such as automotive, medical, consumer electronics or
jewellery. Scenario planning would help Kwirtmak identify which markets could provide
alternative growth.

A third scenario is that aerospace customers still buy printers but demand more customised or
higher-specification machines. This would create an opportunity for Kwirtmak. It could
develop advanced laser melting printers, stronger materials and specialist maintenance
contracts for aerospace customers. Scenario planning would help Kwirtmak decide whether
to invest in premium technology rather than compete on price.

Scenario planning also helps Kwirtmak identify early warning indicators. For example, it
could monitor aerospace customers’ R&D spending, patent filings, procurement behaviour
and public announcements. If customers are clearly moving towards in-house technology,
Kwirtmak can act earlier.

It would also support better financial planning. Kwirtmak can prepare forecasts under
different demand scenarios and assess the impact on revenue, profit, cash flow and
investment needs. This is important because Kwirtmak’s 2026 revenue and profit have
already declined, so another fall in demand could affect shareholder confidence.

Scenario planning can also improve risk management. If a major customer group reduces
purchases, Kwirtmak may face excess inventory, lower production volumes and reduced
materials sales. By planning in advance, Kwirtmak can avoid overinvestment and control
costs.

Overall, scenario planning would benefit Kwirtmak by helping the Board prepare for
uncertainty, avoid overdependence on aerospace customers, and make more flexible strategic
decisions.
Question 2 — Cyber-Attack on CAD
Software Interface
Exam-style question
From: Agata Paluch, Chief Financial Officer
To: Senior Finance Manager
Subject: Cyber-attack on customer design files

Hello,

I have attached an extract from the report prepared by the security consultants who
investigated a cyber-attack affecting Kwirtmak’s customer support platform.

The consultants believe that hackers accessed some customers’ CAD design files through the
software interface used to connect Kwirtmak printers to customers’ 3D CAD systems. No
financial information was stolen, but some customers are concerned that confidential product
designs may have been copied.

I need your advice on two matters:

● Firstly, recommend with reasons the approach that Kwirtmak’s Board should take to
manage digital security.
[sub-task (a) = 60%]

● Secondly, recommend with reasons the controls that should be introduced to prevent
a recurrence of this attack.
[sub-task (b) = 40%]

Agata

Answer (a) — Approach to managing digital security

Kwirtmak’s Board should treat digital security as a strategic risk, not only as an IT problem.
This is because Kwirtmak’s printers rely on hardware, software and CAD interfaces. If
customers lose confidence in the security of Kwirtmak’s systems, they may switch to
competitors such as Breskko.

The cyber-attack is serious because CAD design files may contain confidential intellectual
property. Kwirtmak’s customers include aerospace, automotive, consumer electronics and
jewellery businesses. These customers may use CAD files to design new products, spare parts
or bespoke items. If these files are stolen, customers could suffer commercial losses.
Therefore, Kwirtmak must protect not only its own data but also customer data.
The Board should ensure that digital security has clear ownership. Since Kwirtmak’s product
software interacts with CAD packages, responsibility should involve the CTO, Operations
Director, IT team, internal audit and risk committee. It should not be left only to technical
staff. The Board should receive regular reports on cyber risks, attempted breaches, security
testing and customer complaints.

Kwirtmak should also adopt a risk-based approach. Not all systems carry the same level of
risk. Systems containing customer CAD files, printer operating software and product updates
should receive the highest level of protection. This is because a breach could damage
customer trust and create legal claims.

The Board should also consider stakeholder communication. Customers must be informed
honestly if their files may have been compromised. However, communication should be
carefully managed so that Kwirtmak does not cause unnecessary panic or make unsupported
statements. The company should explain what happened, what action has been taken and
what customers should do.

Kwirtmak should also consider legal and regulatory duties. Depending on data protection and
cybersecurity laws in different countries, the company may need to notify regulators. Since
Kwirtmak sells globally, the legal requirements may vary between countries.

The Board should also create a cyber incident response plan. This should explain who will
respond, how systems will be isolated, how customers will be informed and how evidence
will be preserved. A delayed or confused response would increase reputational damage.

Digital security should also be embedded in product development. Since Kwirtmak develops
printer software and interfaces with CAD systems, security should be considered at the
design stage, not added after launch. This is important because product software weaknesses
may create risk for customers even after printers are sold.

Overall, Kwirtmak should manage digital security through Board-level oversight, risk
assessment, clear accountability, customer communication, regulatory compliance and secure
product design.

Answer (b) — Controls to prevent recurrence

Kwirtmak should introduce stronger access controls. Customer CAD files should only be
accessible to authorised users. Multi-factor authentication should be required for customers
and employees who access the support platform. This would reduce the risk of stolen
passwords being used to enter the system.

Kwirtmak should encrypt CAD files both when stored and when transmitted. This means that
even if hackers access files, they may not be able to read them. Encryption is especially
important because customer designs may be commercially sensitive.
The company should also introduce network segmentation. The customer support platform
should be separated from other systems, such as finance, printer software development and
internal administration. This would limit the damage if one system is breached.

Regular penetration testing should be performed. External cybersecurity specialists should

test whether hackers can access the platform. The results should be reported to the Board or
Audit Committee, and weaknesses should be fixed quickly.

Kwirtmak should also improve software update controls. Since product software connects to
CAD packages, updates must be tested for security weaknesses before release. A formal
approval process should be used before updates go live.

Employee training is also important. Cyber-attacks often start with phishing emails or weak
passwords. Employees should be trained to identify suspicious emails, protect passwords and
report concerns.

Internal audit should review compliance with the new controls. It should test whether access
rights are appropriate, whether security logs are reviewed, and whether incidents are
investigated properly.

Overall, Kwirtmak should introduce access controls, encryption, network segmentation,

penetration testing, secure software development, employee training and internal audit
review.

Question 3 — Sustainability Disclosure and

Share Price
Exam-style question
From: Agata Paluch, Chief Financial Officer
To: Senior Finance Manager
Subject: Climate and sustainability disclosures

Hello,

I have attached a news report that has just gone online.

The report states that Kwirtmak has scored poorly for transparency in sustainability reporting
when compared with other large manufacturers of industrial 3D printers. The report says that
Kwirtmak makes general claims about reducing waste and transport emissions, but does not
provide enough detailed evidence.

I need your advice on two matters:

● Firstly, evaluate the potential impact of Kwirtmak’s lack of transparency on the
behaviour of stakeholders, other than shareholders.
[sub-task (a) = 40%]

● Secondly, evaluate the potential impact of Kwirtmak’s apparent lack of transparency

on its share price.
[sub-task (b) = 60%]

Agata

Answer (a) — Impact on stakeholders other than

shareholders
A lack of transparency could damage Kwirtmak’s relationship with customers. Many
commercial customers may have their own sustainability targets. If Kwirtmak cannot provide
reliable evidence about energy use, recyclability or waste reduction, customers may choose
competitors that provide clearer sustainability data. This could be especially important for
large aerospace, automotive and consumer electronics customers.

Regulators may also become concerned. Kwirtmak’s pre-seen states that the company
engages with government and regulators on sustainability targets. If external reports suggest
that Kwirtmak is not transparent, regulators may become less willing to trust the company’s
views. This could reduce Kwirtmak’s influence in future regulation.

Employees may also be affected. Kwirtmak’s values include innovation and overdelivering
on promises. If employees believe that the company is making sustainability claims without
proper evidence, morale could fall. Skilled technical employees may prefer to work for
competitors with stronger environmental reputations.

Suppliers may also be affected. Kwirtmak depends on third-party suppliers for parts and
materials. If customers and regulators demand better sustainability reporting, Kwirtmak may
need suppliers to provide more data about material sourcing, recyclability and emissions.
Suppliers that cannot provide this information may be replaced.

The wider public and media may also react negatively. 3D printing is often promoted as a
more sustainable manufacturing method because it can reduce waste and transport. If
Kwirtmak is accused of making weak or unsupported claims, it may be accused of
greenwashing.

Overall, poor transparency could weaken trust with customers, regulators, employees,
suppliers and the public. Kwirtmak should respond by improving sustainability metrics and
providing balanced evidence.

Answer (b) — Impact on share price

The apparent lack of transparency could have a negative impact on Kwirtmak’s share price
because investors may view it as a governance and reputational risk. Kwirtmak is a quoted
company, so public reports can quickly affect investor confidence.

The market may worry that Kwirtmak’s sustainability claims are overstated. The pre-seen
states that Kwirtmak promotes sustainability benefits such as efficient use of materials,
recycling and lower transport needs. If investors believe these claims are not supported by
evidence, they may question the quality of management reporting.

The share price impact may be significant because Kwirtmak’s beta is 2.3, meaning its shares
are already highly sensitive to market movements. Negative news may therefore cause a
stronger reaction than for a lower-risk company.

Investors may also compare Kwirtmak with competitors. If other 3D printer manufacturers
provide better sustainability disclosures, investors may believe that Kwirtmak is behind the
market. This could reduce demand for Kwirtmak shares.

The efficient market hypothesis is relevant. In a semi-strong efficient market, share prices
reflect publicly available information. If the news report contains new and credible
information about poor transparency, the share price may adjust quickly. If investors already
expected weak disclosure, the impact may be smaller.

There may also be concern about future compliance costs. If regulators introduce stricter
environmental reporting requirements, Kwirtmak may need to invest in new data systems,
testing and reporting processes. This could increase costs.

However, the impact could be reduced if Kwirtmak responds quickly. The Board could
announce that it will improve sustainability reporting, publish clearer metrics and obtain
independent assurance. If investors believe the issue is being managed properly, the share
price effect may be temporary.

Overall, the lack of transparency could damage the share price by increasing perceived risk,
reducing investor trust and weakening Kwirtmak’s sustainability reputation. The Board
should respond with credible evidence and improved reporting.

Question 4 — Acquisition of 3D Scanning

Company
Exam-style question
From: Agata Paluch, Chief Financial Officer
To: Senior Finance Manager
Subject: Possible acquisition of ScanBuild

Hello,
I have attached an extract from the minutes of this morning’s Board meeting.

Kwirtmak is considering acquiring ScanBuild, a company that develops high-definition 3D

scanners and CAD software. ScanBuild has not paid a dividend for several years because it
reinvests heavily in software development. Kwirtmak’s shareholders, however, have
continued to receive significant dividends.

I need your advice on two matters:

● Firstly, recommend with reasons the factors that Kwirtmak should take into account
in deciding whether to acquire ScanBuild.
[sub-task (a) = 50%]

● Secondly, evaluate the likely response of ScanBuild’s shareholders if the acquisition is

funded by an exchange of shares in Kwirtmak.
[sub-task (b) = 50%]

Agata

Answer (a) — Factors in deciding whether to acquire

ScanBuild
Kwirtmak should first consider the strategic fit of ScanBuild. 3D scanning technology is
closely linked to 3D printing because customers can scan existing parts, edit them in CAD
software and print replacements. This fits Kwirtmak’s business because its printers already
interact with CAD systems. The acquisition could allow Kwirtmak to offer a complete
solution: scanning, CAD editing, printing and compatible materials.

Kwirtmak should also consider whether the acquisition supports its mission and vision.
Kwirtmak’s mission is to transform customers through innovation in design and production.
ScanBuild’s technology could help customers design and reproduce parts more quickly.
Therefore, the acquisition appears strategically suitable.

The Board should also assess the financial value of the acquisition. It should prepare a
valuation using discounted cash flow and compare the price with expected future cash flows.
Since ScanBuild reinvests heavily and does not pay dividends, its value may be based on
growth potential rather than current returns. Kwirtmak must avoid overpaying for optimistic
forecasts.

Synergies should also be considered. Kwirtmak could sell scanners to existing customers and
sell printers and materials to ScanBuild’s customers. However, these synergies must be
realistic. Not every customer will need scanning technology, and some ScanBuild customers
may already use competitor printers.

The Board should also evaluate the impact on financial risk. Kwirtmak already has significant
borrowings and declining profits. If the acquisition requires large funding or integration costs,
it could place pressure on cash flow.
Technology risk is another important factor. Kwirtmak should assess whether ScanBuild’s
software is compatible with Kwirtmak’s printers and with leading CAD packages. If
integration is poor, customers may not receive the expected benefits.

Staff retention is also critical. ScanBuild’s value may depend heavily on software developers
and technical staff. If these employees leave after acquisition, Kwirtmak may lose much of
the value it paid for.

Kwirtmak should also consider cultural fit. ScanBuild may be a smaller, innovation-focused
company, while Kwirtmak is a larger quoted manufacturer. If the cultures clash, integration
may be difficult.

Overall, Kwirtmak should acquire ScanBuild only if there is strong strategic fit, fair
valuation, realistic synergies, compatible technology and a clear staff retention plan.

Answer (b) — Likely response of ScanBuild’s

shareholders to a share exchange
ScanBuild’s shareholders may welcome a share exchange if they believe Kwirtmak’s shares
offer good long-term value. By receiving Kwirtmak shares, they would continue to benefit
from any future growth created by combining the two businesses.

They may also like the fact that Kwirtmak is a quoted company. If Kwirtmak’s shares are
publicly traded, ScanBuild shareholders may receive more liquid shares than their current
investment. This could make it easier for them to sell their shares in future.

However, ScanBuild’s shareholders may be concerned about Kwirtmak’s recent financial

performance. Kwirtmak’s revenue and profit have declined, and its share price has been
volatile. If ScanBuild shareholders believe Kwirtmak’s shares are risky or undervalued, they
may prefer cash.

They may also be concerned about dividend policy. ScanBuild has not paid dividends for
several years because it reinvests in development. Its shareholders may be growth-focused
and may prefer reinvestment. Kwirtmak’s shareholders have received significant dividends.
ScanBuild shareholders may worry that Kwirtmak will distribute too much cash instead of
investing in technology.

The exchange ratio will also be important. ScanBuild shareholders will want to ensure that
the number of Kwirtmak shares they receive reflects the fair value of ScanBuild. If they
believe the exchange ratio undervalues ScanBuild’s future growth, they may reject the offer.

There may also be concern about control. If ScanBuild shareholders receive only a small
percentage of Kwirtmak, they may have little influence over future strategy. They may worry
that ScanBuild’s technology will not receive enough attention after acquisition.

Overall, ScanBuild’s shareholders may accept a share exchange if the valuation is fair and
they believe in Kwirtmak’s future strategy. However, they may be cautious because of
Kwirtmak’s volatile share price, declining profit and potentially different dividend
expectations.

Question 5 — Defective Printer and Share

Price Impact
Exam-style question
From: Agata Paluch, Chief Financial Officer
To: Senior Finance Manager
Subject: Defective aerospace printer

Hello,

I have attached a news report that has just gone online.

One of Kwirtmak’s aerospace customers has reported that a laser melting printer supplied by
Kwirtmak produced defective metal spare parts. The parts were discovered before being used
in aircraft, but the customer has suspended all further use of Kwirtmak printers while it
investigates the issue.

Kwirtmak’s share price fell by 12% after the news report was released.

I need your advice on two matters:

● Firstly, recommend with reasons how stakeholder analysis could help Kwirtmak
understand the impact of this incident.
[sub-task (a) = 40%]

● Secondly, recommend with reasons how Kwirtmak’s Board might mitigate the impact
of this incident on the company’s share price.
[sub-task (b) = 60%]

Agata

Answer (a) — How stakeholder analysis could help

Stakeholder analysis would help Kwirtmak identify which parties are affected by the
defective printer incident and how they are likely to respond. This would allow the Board to
prioritise communication and action.

The aerospace customer is a key stakeholder because it directly experienced the product
failure. It has high power because it may cancel orders, claim compensation or influence
other aerospace companies. It also has high interest because the defect may affect safety and
operations. Kwirtmak should treat this customer as a key player and engage with it urgently.

Other customers are also important stakeholders. Even if they were not affected, they may
worry that similar defects could occur in their printers. This is especially relevant for
customers in aerospace, automotive and medical applications, where safety and accuracy are
critical. Kwirtmak should reassure them that it is investigating the issue and checking
whether the fault affects other machines.

Regulators may also be stakeholders. Aerospace is safety-critical, and regulators may want to
understand whether defective parts could have entered the supply chain. Kwirtmak should
cooperate fully with any regulatory investigation.

Employees are another stakeholder group. Engineers, customer support staff and sales teams
may face pressure from customers and media. They need clear internal communication so
that they understand what happened and how to respond.

Suppliers should also be considered. The defect may have been caused by a faulty component
or poor-quality material supplied by a third party. Kwirtmak may need to review supplier
quality and traceability.

Shareholders are clearly affected because the share price has fallen. However, the question
asks how stakeholder analysis can help understand the impact, and shareholders are only one
group. The Board must recognise that the share price will not recover unless customers,
regulators and the market regain confidence.

Overall, stakeholder analysis helps Kwirtmak identify who has power, who has interest, and
what action is needed to restore trust.

Answer (b) — How the Board might mitigate the share

price impact
The Board should first respond quickly and transparently. The share price has fallen because
investors fear legal claims, lost customers, reputational damage and possible wider quality
problems. Silence could make the market assume the worst.

Kwirtmak should issue a carefully worded public statement. The statement should confirm
that the company is investigating the issue, that the defective parts were not used in aircraft,
and that customer safety is the priority. However, the statement should avoid making
unsupported claims before the technical investigation is complete.

The Board should also appoint an independent technical expert to review the incident. This
would increase credibility because investors and customers may trust an independent review
more than an internal investigation.

Kwirtmak should engage directly with the affected customer. If the fault is Kwirtmak’s
responsibility, the company should repair or replace the printer, offer technical support and
consider compensation. Retaining the customer is important because losing a major aerospace
customer could damage future revenue expectations.

The Board should also assess whether the fault affects other printers. If necessary, Kwirtmak
should issue a software update, safety notice or recall. Although this may be costly, it could
protect long-term reputation. Investors may react positively if they believe the Board is
controlling the risk.

Kwirtmak should communicate with other major customers. The aim is to prevent wider loss
of confidence. The company should explain the investigation process and any immediate
checks customers should perform.

The Board should also review internal quality controls. If the incident reveals weaknesses in
production, software testing or supplier quality, Kwirtmak should announce improvements.
This may reassure investors that the problem will not recur.

The efficient market hypothesis is also relevant. If the market is semi-strong efficient,
Kwirtmak’s share price will react quickly to new public information. Therefore, the Board’s
announcements must provide credible new information, not only general reassurance. For
example, confirming that the defect is limited to one machine would be more useful than
simply saying that Kwirtmak takes quality seriously.

Overall, Kwirtmak can mitigate the share price impact by responding quickly, being
transparent, supporting the customer, investigating independently, checking other machines
and improving controls.

Question 6 — New Factory for Medical 3D

Printing
Exam-style question
From: Agata Paluch, Chief Financial Officer
To: Senior Finance Manager
Subject: Medical 3D printing factory proposal

Hello,

I have forwarded a proposal from Dr David Wallace, our Chief Executive Officer.

David believes that Kwirtmak should build a specialist factory to manufacture 3D printers for
medical customers. These printers would be used by hospitals, dentists and medical
laboratories to manufacture dental implants, artificial limbs and other customised medical
components.
The factory would create new jobs and may strengthen Kwirtmak’s reputation as an
innovative company, but it would also require significant investment and regulatory approval.

I need your advice on two matters:

● Firstly, evaluate the argument that building and operating this medical 3D printing
factory would be consistent with Kwirtmak’s mission, vision and values.
[sub-task (a) = 60%]

● Secondly, evaluate the impact that the factory would have on the risks associated with
Kwirtmak’s business.
[sub-task (b) = 40%]

Agata

Answer (a) — Consistency with mission, vision and values

The proposal appears consistent with Kwirtmak’s mission because the company’s mission is
to transform customers through innovation in design and production. Medical 3D printing
could transform how hospitals, dentists and laboratories produce customised medical
components. For example, 3D printers can produce items that fit individual patients more
accurately and quickly than traditional methods.

The proposal also supports Kwirtmak’s vision to be a leading provider of additive

manufacturing solutions across industries in a sustainable manner. Entering the medical
sector would expand Kwirtmak into a high-value industry where accuracy and reliability are
essential. This could strengthen Kwirtmak’s position as a leading provider of advanced 3D
printing solutions.

The proposal is also consistent with the value that Kwirtmak’s innovations are driven by
customer need. Medical customers need accurate, customised and reliable components. If
Kwirtmak designs printers specifically for these needs, it would be responding directly to
customer requirements.

The proposal may also support the value of creating wealth and success. A specialist medical
printing factory could create new revenue streams, improve profitability and create jobs. It
could also generate long-term shareholder value if the medical market grows.

However, the proposal must be managed carefully to remain consistent with Kwirtmak’s
value of overdelivering on promises. Medical customers require extremely reliable products.
If Kwirtmak cannot meet regulatory standards or product safety requirements, it would fail to
deliver on its promises and could damage its reputation.

The proposal may also support sustainability. 3D printing can reduce waste and allow local
production. Medical components could be produced closer to patients, reducing waiting times
and transport. However, Kwirtmak must provide evidence rather than making general
sustainability claims.
Overall, the factory is consistent with Kwirtmak’s mission, vision and values if it is built
around genuine customer need, high quality, safety and innovation. It would not be consistent
if Kwirtmak enters the market too quickly without regulatory approval and strong controls.

Answer (b) — Impact on business risks

The factory would increase regulatory risk. Medical printers and materials may need approval
before they can be used for patient-related components. If Kwirtmak fails to meet regulatory
requirements, product launches may be delayed, and the company may face legal penalties.

The factory would also increase product liability risk. If a printer produces a defective dental
implant or medical component, patients could be harmed. This would be more serious than
defects in non-critical products. Kwirtmak would need strict quality assurance and clear
customer training.

Financial risk would also increase because the factory would require significant investment.
If demand from medical customers is lower than expected, Kwirtmak may not recover its
investment. This is important because Kwirtmak’s revenue and profit have already declined.

Operational risk would increase because medical printers may require higher precision,
specialist materials and stricter testing than some existing printers. Kwirtmak may need to
recruit specialist staff and develop new processes.

However, the factory could reduce strategic risk by diversifying Kwirtmak’s customer base.
If demand from existing markets such as aerospace or automotive becomes volatile, medical
customers could provide an alternative source of growth.

Reputational risk would also increase. Success in medical printing could enhance Kwirtmak’s
reputation as an innovative and socially valuable company. However, any failure could
damage the whole Kwirtmak brand.

Overall, the factory could create significant growth opportunities but would increase
regulatory, product liability, financial, operational and reputational risks. Kwirtmak should
proceed only after detailed appraisal, regulatory consultation and pilot testing.

Question 1 — Beta, Cost of Equity and

Shareholder Risk
Exam-style question
From: Agata Paluch, Chief Financial Officer
To: Senior Finance Manager
Subject: Shareholder risk and beta

Hello,
I have forwarded an extract from a recent investor report.

The report states that Kwirtmak’s beta of 2.3 is significantly higher than the average beta of
other quoted manufacturing companies. Some investors have asked whether this means
Kwirtmak is too risky, especially given the fall in revenue and profit in 2026.

I need your advice on two matters:

● Firstly, explain what Kwirtmak’s beta of 2.3 indicates and evaluate why Kwirtmak
may have such a high beta.
[sub-task (a) = 50%]

● Secondly, discuss how Kwirtmak’s high beta could affect its cost of equity and future
investment decisions.
[sub-task (b) = 50%]

Answer (a) — Meaning of beta and reasons for high beta

Kwirtmak’s beta of 2.3 means that its share price is more volatile than the overall market. A
beta above 1 indicates that the company’s shares are more sensitive to market movements.
Therefore, if the market rises or falls, Kwirtmak’s share price may move by a greater
percentage than the market average.

This high beta suggests that shareholders view Kwirtmak as a relatively risky investment.
This is understandable because Kwirtmak operates in a technology-based industry where
innovation, product quality and customer demand can change quickly. 3D printing is still
developing, and customers may switch to new technologies or competitors if Kwirtmak does
not continue to innovate.

Kwirtmak’s beta may also be high because its financial performance has weakened. Revenue
fell from E$2,856.6m in 2025 to E$2,320.0m in 2026, and profit fell from E$1,142.4m to
E$810.6m. Investors may see this as a sign that Kwirtmak is facing demand pressure or
losing competitiveness.

Competitor pressure may also increase perceived risk. Breskko, Kwirtmak’s closest
competitor, has performed better than Kwirtmak in 2026. If investors believe Breskko is
gaining market share, they may view Kwirtmak as a higher-risk company.

Kwirtmak also sells globally, which exposes it to currency risk, global economic trends and
changes in customer investment decisions. This could make earnings more uncertain and
increase share price volatility.

Conclusion for (a):

Kwirtmak’s beta of 2.3 indicates high systematic risk. This may be caused by its technology-
based business, declining profit, competitor pressure, volatile demand and global exposure.
Answer (b) — Impact on cost of equity and investment
decisions
A high beta increases Kwirtmak’s cost of equity. Under CAPM, the cost of equity is based on
the risk-free rate plus beta multiplied by the market risk premium. Since Kwirtmak’s beta is
2.3, shareholders will require a higher return to compensate for the higher risk.

This means Kwirtmak’s investment projects must generate higher returns to create
shareholder value. For example, if Kwirtmak is considering a new factory, acquisition or
medical 3D printing investment, the project should only be accepted if its return is above the
required return of shareholders.

A high cost of equity may also reduce the number of projects with a positive NPV. When
future cash flows are discounted at a higher rate, their present value becomes lower.
Therefore, a project that looks attractive using a low discount rate may become unattractive
when Kwirtmak’s high risk is properly reflected.

Kwirtmak must also consider whether each project has the same risk as the existing business.
A project in a new area, such as medical 3D printing, may be even riskier because of
regulation and product liability. In that case, Kwirtmak may need to use a project-specific
discount rate higher than the company’s existing WACC.

A high beta may also make equity finance more expensive. If Kwirtmak issues new shares,
investors may demand a lower issue price or higher expected return because of the
company’s risk profile.

Conclusion for (b):

Kwirtmak’s high beta increases its cost of equity and raises the required return for new
investments. The Board should use risk-adjusted appraisal and accept only projects that are
expected to create value after allowing for this higher risk.

Question 2 — Geared and Ungeared Beta

for a Medical Printer Project
Exam-style question
From: Agata Paluch, Chief Financial Officer
To: Senior Finance Manager
Subject: Risk-adjusted beta for medical printer investment

Hello,

I have forwarded a proposal from Dr David Wallace, our CEO.

David is proposing that Kwirtmak invests in a new range of 3D printers for medical
laboratories and dentists. The project is different from Kwirtmak’s existing business because
it involves greater regulation and patient safety concerns.

One director has suggested that Kwirtmak should use its existing beta of 2.3 when calculating
the cost of equity for this project. Another director believes that Kwirtmak should use a
project-specific beta by looking at companies already operating in the medical technology
sector.

I need your advice on two matters:

● Firstly, explain why Kwirtmak may need to use a project-specific beta rather than its
existing beta of 2.3.
[sub-task (a) = 50%]

● Secondly, explain how geared and ungeared beta could be used to estimate an
appropriate beta for the medical printer project.
[sub-task (b) = 50%]

Answer (a) — Why project-specific beta may be needed

Kwirtmak may need a project-specific beta because the medical printer project may have a
different risk profile from Kwirtmak’s existing business. Kwirtmak currently manufactures
commercial 3D printers for industries such as aerospace, automotive, consumer electronics
and jewellery. Medical printing would expose Kwirtmak to additional risks, including
regulation, patient safety, product liability and approval of materials.

Using Kwirtmak’s existing beta of 2.3 assumes that the medical project has the same
systematic risk as Kwirtmak’s current operations. This may not be correct. If the medical
project is riskier, using the existing beta may understate the required return and make the
project appear more attractive than it really is.

The medical sector may also have different demand characteristics. Medical customers may
have more stable long-term demand, but they may also require strict certification and
compliance. Therefore, the project’s risk may be higher or lower than Kwirtmak’s current
average risk.

Using the wrong beta could lead to a wrong investment decision. If the discount rate is too
low, Kwirtmak may accept a project that destroys shareholder value. If the discount rate is
too high, Kwirtmak may reject a project that could create value.

Conclusion for (a):

Kwirtmak should consider a project-specific beta because the medical printer project has
different risks from its existing operations. This would provide a more accurate cost of equity
for investment appraisal.
Answer (b) — Use of geared and ungeared beta
Kwirtmak can estimate a project-specific beta by using proxy companies that already operate
in the medical technology or medical equipment sector. However, the observed beta of those
companies will normally be a geared beta, meaning it reflects both business risk and
financial risk.

To make the beta useful for Kwirtmak, the first step is to ungear the proxy company beta.
This removes the effect of the proxy company’s capital structure and leaves the asset beta,
which reflects the business risk of medical technology operations.

The formula usually used is:

Asset beta = Equity beta ÷ [1 + (1 − tax rate) × Debt / Equity]

After calculating the asset beta for several proxy companies, Kwirtmak could take an
average. This gives an estimate of the business risk of the medical technology sector.

The next step is to regear the asset beta using Kwirtmak’s own target capital structure. This
gives an equity beta that reflects the business risk of the medical project and Kwirtmak’s
financial risk.

The formula is:

Equity beta = Asset beta × [1 + (1 − tax rate) × Debt / Equity]

This regeared beta can then be used in CAPM to calculate a project-specific cost of equity.

This approach is useful because it avoids relying only on Kwirtmak’s existing beta, which
reflects the average risk of its current business. It also recognises that financial gearing
increases shareholder risk because debt creates fixed interest obligations.

Conclusion for (b):

Kwirtmak should use proxy company betas, ungear them to remove financial risk, then regear
them using Kwirtmak’s capital structure. This would give a better beta for the medical printer
investment.

Question 3 — WACC for New Factory

Investment
Exam-style question
From: Agata Paluch, Chief Financial Officer
To: Senior Finance Manager
Subject: WACC for factory investment appraisal
Hello,

I have attached a proposal for a new factory to manufacture laser melting and material jetting
printers. The investment would require significant capital expenditure and may be financed
using a combination of debt and equity.

The Board has asked whether Kwirtmak should use its current WACC to appraise the project.

I need your advice on two matters:

● Firstly, explain why WACC is relevant when appraising the proposed factory
investment.
[sub-task (a) = 40%]

● Secondly, evaluate whether Kwirtmak’s current WACC would be appropriate for

appraising this project.
[sub-task (b) = 60%]

Answer (a) — Why WACC is relevant

WACC is relevant because it represents the average return required by Kwirtmak’s providers
of finance, including shareholders and lenders. It is the minimum return that a project must
generate to maintain shareholder value.

When appraising the proposed factory, Kwirtmak would forecast future cash inflows and
outflows and discount them to present value. The WACC would normally be used as the
discount rate if the project has similar risk to the existing business and is financed in line with
the company’s existing capital structure.

If the project produces a positive NPV after discounting at WACC, it should create
shareholder value. If the NPV is negative, it would reduce shareholder value and should
normally be rejected.

WACC is also important because the factory will require significant investment. The cash
flows will occur over many years, so discounting is necessary to reflect both the time value of
money and business risk.

Conclusion for (a):

WACC is relevant because it helps Kwirtmak assess whether the factory will generate returns
above the required return of its finance providers.

Answer (b) — Whether current WACC is appropriate

Kwirtmak’s current WACC may be appropriate only if the factory has similar risk to
Kwirtmak’s existing operations and will be financed using Kwirtmak’s normal mix of debt
and equity.

There is an argument that the current WACC could be used because the factory will produce
laser melting and material jetting printers, which are already part of Kwirtmak’s product
range. Therefore, the project may be an expansion of existing operations rather than entry
into a completely new industry.

However, there are reasons why the current WACC may not be suitable. The factory may
increase operating risk if demand for advanced printers is uncertain. Kwirtmak’s pre-seen
already identifies volatile sales demand as a principal risk. If sales do not materialise, the new
factory may create excess capacity and high fixed costs.

The financing method also matters. If the factory is funded with more debt than Kwirtmak’s
normal capital structure, financial risk will increase. This could increase the cost of equity
and possibly the cost of debt. In that case, the current WACC may understate the project’s
risk.

Kwirtmak’s current beta is also high at 2.3, suggesting that investors already perceive
significant risk. If the new factory makes earnings even more volatile, the required return
may be higher.

However, if the factory simply increases capacity for existing proven products and is funded
using Kwirtmak’s normal debt-equity mix, the current WACC may be acceptable.

Conclusion for (b):

Kwirtmak should use current WACC only if the project has similar business risk and
financing structure to the existing company. If demand risk or gearing is higher, Kwirtmak
should use a risk-adjusted WACC.

Question 4 — EPS Impact of a Rights Issue

Exam-style question
From: Agata Paluch, Chief Financial Officer
To: Senior Finance Manager
Subject: Rights issue and EPS impact

Hello,

I have forwarded an email from one of our non-executive directors.

She is concerned that the proposed rights issue to finance the new factory may reduce
Kwirtmak’s earnings per share. She believes that shareholders may object if EPS falls after
the rights issue.
I need your advice on two matters:

● Firstly, explain how a rights issue could affect Kwirtmak’s EPS.

[sub-task (a) = 50%]

● Secondly, evaluate whether EPS should be the main measure used by shareholders to
assess the rights issue.
[sub-task (b) = 50%]

Answer (a) — How rights issue affects EPS

A rights issue could reduce Kwirtmak’s EPS because it increases the number of shares in
issue. EPS is calculated as:

EPS = Profit attributable to ordinary shareholders ÷ Number of ordinary shares

If Kwirtmak issues new shares, the denominator increases. Unless the new factory generates
enough additional profit, EPS may fall in the short term.

This is a real concern because the factory may take time to become operational. During
construction and early production, Kwirtmak may have more shares in issue but no
immediate increase in profit. Therefore, EPS could be diluted in the short term.

However, the rights issue may support EPS in the long term if the factory increases
production capacity and generates additional profit. If the new factory helps Kwirtmak sell
more advanced printers, future profits may increase enough to offset the higher number of
shares.

The effect on EPS also depends on the issue price and number of new shares issued. If the
rights issue is priced at a large discount, more shares may need to be issued to raise the
required funds. This could increase EPS dilution.

Conclusion for (a):

A rights issue may reduce EPS in the short term because the number of shares increases
before the factory generates profit. However, EPS may recover if the investment improves
future earnings.

Answer (b) — Whether EPS should be the main measure

EPS should not be the main measure used to assess the rights issue because EPS focuses on
accounting profit per share rather than shareholder value creation. A project could reduce
EPS in the short term but still create value if it has a positive NPV.
The better measure is whether the factory generates returns above Kwirtmak’s cost of capital.
If the factory has a positive NPV, it should increase shareholder wealth even if EPS initially
falls.

EPS can also be misleading because it ignores risk. A project may increase EPS but expose
Kwirtmak to higher demand risk, operational risk or financial risk. Shareholders should
consider both return and risk.

EPS also ignores cash flow timing. The factory may require large cash outflows now and
generate benefits later. NPV is better because it considers the timing and risk of future cash
flows.

However, EPS still matters because investors often pay attention to it. A fall in EPS may
create negative market reaction, especially if shareholders do not understand the long-term
benefits of the rights issue. Therefore, Kwirtmak should explain why short-term EPS dilution
may be acceptable.

Conclusion for (b):

EPS is useful but should not be the main decision measure. Kwirtmak should focus on NPV
and shareholder value, while communicating clearly to manage concerns about short-term
EPS dilution.

Question 5 — NPV of Carbon Fibre Printer

Project
Exam-style question
From: Agata Paluch, Chief Financial Officer
To: Senior Finance Manager
Subject: NPV appraisal of carbon fibre printer project

Hello,

I have forwarded a proposal from Dr Said Abouchdak, our CTO.

Said has proposed investing in a new carbon fibre 3D printer range. The project would
require high initial research and development expenditure, but it could allow Kwirtmak to sell
to aerospace, automotive and sporting goods customers that require lightweight and strong
components.

I need your advice on two matters:

● Firstly, explain why NPV would be an appropriate method for appraising the carbon
fibre printer project.
[sub-task (a) = 40%]
● Secondly, evaluate the key cash flows and risks that should be included in the NPV
appraisal.
[sub-task (b) = 60%]

Answer (a) — Why NPV is appropriate

NPV is appropriate because it considers the time value of money. The carbon fibre printer
project will require significant upfront expenditure, but the benefits will be earned over future
years. NPV discounts those future cash flows to present value, making the investment
decision more reliable.

NPV also focuses on shareholder value. If the project has a positive NPV, it means the
expected returns are greater than the required return of investors. Therefore, the project
should increase shareholder wealth.

NPV is better than payback because it considers all relevant cash flows, not only how quickly
the initial investment is recovered. This is important for a technology project because major
benefits may arise several years after development begins.

NPV also allows Kwirtmak to adjust for risk by using an appropriate discount rate. Since
carbon fibre printing may involve technical and market uncertainty, Kwirtmak can use a
higher risk-adjusted discount rate if necessary.

Conclusion for (a):

NPV is suitable because it considers cash flows, timing, risk and shareholder value. It is
therefore better than relying only on accounting profit or payback.

Answer (b) — Cash flows and risks to include

The NPV should include the initial R&D expenditure required to develop the carbon fibre
printer. This should include staff costs, prototype development, testing, software development
and material research.

It should also include capital expenditure on new equipment or production facilities needed to
manufacture the printers. If existing factories need modification, those costs should also be
included.

The appraisal should include incremental revenue from selling carbon fibre printers.
Kwirtmak should estimate demand from aerospace, automotive and sporting goods
customers. However, forecasts should be cautious because demand may be uncertain.

The appraisal should also include incremental material sales. Kwirtmak already supplies
materials for use in its printers, and many customers choose Kwirtmak materials because they
are compatible. Carbon fibre materials could create recurring revenue after the printer sale.
Incremental operating costs should be included, such as production labour, materials,
warranty costs, maintenance support and marketing costs.

Working capital effects should also be included. If the project requires additional inventory of
specialist materials or longer customer credit periods, this will increase cash investment.

Tax effects should be included because tax affects the actual cash flows available to
investors. Any tax relief on R&D or capital allowances should also be considered if
applicable.

The appraisal should also include residual value if any equipment or technology has resale
value at the end of the project.

Key risks include demand risk. Customers may not adopt carbon fibre printing as quickly as
expected. There is also technical risk because the printer may not achieve the required
strength, accuracy or reliability.

There is also competitor risk. Breskko or another competitor may develop similar technology
and reduce Kwirtmak’s expected sales.

Quality risk is also important. If carbon fibre parts are used in aerospace or automotive
applications, product failure could be serious. This may increase warranty costs and legal
risk.

Conclusion for (b):

The NPV should include all incremental cash flows, including R&D, capital expenditure,
revenue, materials income, operating costs, working capital, tax and residual value. The
appraisal should also use sensitivity analysis for demand, price, costs and discount rate.

Question 6 — NPV, Sensitivity Analysis and

Strategic Decision
Exam-style question
From: Agata Paluch, Chief Financial Officer
To: Senior Finance Manager
Subject: Sensitivity of proposed investment

Hello,

I have attached the draft NPV appraisal for a proposed investment in a new high-speed
extrusion printer. The draft appraisal shows a small positive NPV. However, the NPV is very
sensitive to sales volume and selling price.

I need your advice on two matters:

● Firstly, evaluate the limitations of relying only on the draft NPV appraisal when
deciding whether to proceed.
[sub-task (a) = 50%]

● Secondly, recommend with reasons how sensitivity analysis and scenario planning
could help the Board make a better decision.
[sub-task (b) = 50%]

Answer (a) — Limitations of relying only on NPV

Although NPV is a strong investment appraisal method, relying only on the draft NPV may
be risky, especially if the NPV is only slightly positive. A small positive NPV means the
project may create value only if the assumptions are accurate.

The first limitation is forecast uncertainty. Sales volume, selling price, production cost and
development time are all estimates. If any major assumption is wrong, the NPV may become
negative.

The second limitation is demand volatility. Kwirtmak’s pre-seen already identifies volatile
sales demand as a principal risk. Therefore, demand for the new high-speed extrusion printer
may be difficult to predict.

The third limitation is competitor reaction. Breskko may reduce prices or launch a similar
printer. This could reduce Kwirtmak’s expected sales volume or selling price, making the
NPV worse.

The fourth limitation is that NPV may not capture all strategic benefits. For example, the
project may help Kwirtmak maintain its reputation for innovation or protect key customer
relationships. These benefits may be difficult to quantify.

However, NPV may also fail to capture all strategic risks. If the project fails, Kwirtmak’s
reputation may be damaged, especially if customers experience quality problems.

Conclusion for (a):

The Board should not rely only on a small positive NPV. It should challenge the assumptions
and consider risk, strategy, competitor response and non-financial factors.

Answer (b) — Use of sensitivity analysis and scenario

planning
Sensitivity analysis would help the Board identify which assumptions have the greatest
impact on NPV. For example, if a small fall in selling price makes the NPV negative, the
Board will know that pricing is a critical risk.
Sensitivity analysis can also help management focus risk control. If sales volume is the most
sensitive factor, Kwirtmak should strengthen market research and obtain customer
commitments before investing.

Scenario planning would also be useful because it allows the Board to consider different
possible futures rather than one forecast. For example, the Board could prepare:

Best case: Strong demand, high selling price and quick launch.
Base case: Moderate demand and normal production costs.
Worst case: Breskko responds aggressively, demand is weak and production costs rise.

This would help Kwirtmak understand the range of possible outcomes. It would also help the
Board prepare contingency plans, such as delaying investment, launching in stages or limiting
initial production.

Scenario planning is especially useful for Kwirtmak because the 3D printing industry is
uncertain and technology-driven. Customer preferences, competitor actions and material
costs can change quickly.

Conclusion for (b):

Sensitivity analysis and scenario planning would help the Board understand the risk behind
the NPV. Kwirtmak should proceed only if the project remains acceptable under realistic
downside scenarios.

Question 7 — EPS versus NPV in

Acquisition Decision
Exam-style question
From: Agata Paluch, Chief Financial Officer
To: Senior Finance Manager
Subject: Acquisition appraisal method

Hello,

I have forwarded a proposal to acquire a small software company that develops CAD
interface technology for 3D printers.

One director supports the acquisition because it is expected to increase Kwirtmak’s EPS in
the first year after acquisition. Another director argues that the Board should focus on NPV
rather than EPS.

I need your advice on two matters:

● Firstly, explain why the acquisition may increase EPS but still fail to create
shareholder value.
[sub-task (a) = 50%]

● Secondly, recommend whether the Board should rely more on EPS or NPV when
deciding whether to proceed.
[sub-task (b) = 50%]

Answer (a) — Why EPS may increase but value may not
be created
The acquisition may increase EPS if the acquired company’s profit is added to Kwirtmak’s
group profit and the increase in shares is proportionately smaller. This can make the
acquisition appear attractive.

However, EPS growth does not necessarily mean shareholder value is created. The
acquisition may increase accounting earnings but still generate a return below the cost of
capital. If Kwirtmak pays too much for the company, the present value of future benefits may
be less than the purchase price.

EPS also ignores risk. The software company may operate in a risky technology area, and
future profits may be uncertain. If the acquisition increases risk, shareholders may require a
higher return.

EPS can also be affected by accounting treatment. For example, amortisation, goodwill
impairment and acquisition costs may affect profit in different periods. This means EPS may
not reflect real cash value creation.

The acquisition could also increase EPS in the first year but destroy value later if expected
synergies do not occur. For example, Kwirtmak may expect to cross-sell software to printer
customers, but customers may not adopt it.

Conclusion for (a):

EPS can improve even when shareholder value is not created. The key issue is whether the
acquisition’s future cash flows exceed the price paid and the cost of capital.

Answer (b) — Whether to rely more on EPS or NPV

The Board should rely more on NPV because NPV directly measures shareholder value. It
considers cash flows, timing and risk through the discount rate. If the acquisition has a
positive NPV, it should create value.
NPV is also better for comparing strategic options. Kwirtmak may need to choose between
acquisition, internal R&D, factory expansion or sustainability investment. NPV allows the
Board to compare these options using a consistent financial basis.

EPS should still be considered because investors often pay attention to it. If an acquisition
reduces EPS in the short term, shareholders may react negatively. Therefore, Kwirtmak
should explain the long-term value creation logic clearly.

However, EPS should not drive the decision. A focus on EPS may encourage management to
pursue acquisitions that look good in accounting terms but do not create economic value.

Conclusion for (b):

The Board should rely primarily on NPV, supported by strategic analysis and risk
assessment. EPS should be used only as a secondary communication measure, not as the main
decision criterion.

Question 8 — Debt, WACC and Financial

Gearing
Exam-style question
From: Agata Paluch, Chief Financial Officer
To: Senior Finance Manager
Subject: Debt finance and WACC

Hello,

I have attached a proposal to finance a new printer assembly line entirely through long-term
debt.

One director argues that debt is cheaper than equity and will reduce Kwirtmak’s WACC.
Another director is concerned that additional debt will increase financial gearing and
shareholder risk.

I need your advice on two matters:

● Firstly, evaluate the argument that using more debt could reduce Kwirtmak’s
WACC.
[sub-task (a) = 50%]

● Secondly, discuss the risks of increasing financial gearing for Kwirtmak.

[sub-task (b) = 50%]
Answer (a) — Whether more debt could reduce WACC
Debt is usually cheaper than equity because lenders take less risk than shareholders. Interest
may also be tax-deductible, creating a tax shield. Therefore, using some debt can reduce
WACC.

For Kwirtmak, debt finance may appear attractive because it could fund the new assembly
line without issuing new shares. This avoids dilution and may improve returns to existing
shareholders if the project is successful.

However, the benefit of cheaper debt is limited. As gearing increases, shareholders face
higher financial risk because interest must be paid before dividends. As a result, shareholders
may demand a higher return, increasing the cost of equity.

Lenders may also demand higher interest rates if they believe Kwirtmak is becoming too
highly geared. Kwirtmak already has E$1,350m of borrowings, so additional debt may
increase concerns about financial risk.

Therefore, more debt may reduce WACC only up to an optimal point. Beyond that point, the
increase in financial risk may increase the cost of equity and debt, causing WACC to rise.

Conclusion for (a):

More debt may reduce WACC initially because debt is cheaper and tax-efficient, but
excessive debt can increase financial risk and raise WACC.

Answer (b) — Risks of increasing financial gearing

Increasing financial gearing would increase Kwirtmak’s fixed interest obligations. This is
risky because Kwirtmak’s revenue and profit have declined. If profit falls further, interest
cover may weaken.

Higher gearing may also reduce financial flexibility. Kwirtmak operates in a technology-
driven industry and may need funds for R&D, acquisitions, sustainability improvements or
new printer development. If too much cash is committed to interest payments, the company
may have less flexibility.

Higher debt may also affect shareholder confidence. Kwirtmak’s beta is already high at 2.3,
suggesting that shareholders view it as risky. More debt could increase equity risk further and
may cause the share price to fall.

There may also be covenant risk. Lenders may impose restrictions on dividends, further
borrowing or capital expenditure. This could limit the Board’s ability to respond to future
opportunities.

Higher gearing may increase the risk of financial distress if demand remains volatile.
Kwirtmak’s principal risks include volatility in sales demand, so taking on more fixed
obligations may be dangerous.
Conclusion for (b):
Kwirtmak should be cautious about increasing debt. Debt may be useful for stable,
predictable projects, but excessive gearing could increase risk, reduce flexibility and damage
shareholder confidence.

Question 1 — M&M Theory and Financing New Factory

Exam-style question

From: Agata Paluch, Chief Financial Officer

To: Senior Finance Manager
Subject: Financing new production facility

Hello,

I have attached an extract from this morning’s Board meeting.

The Board is considering building a new production facility to manufacture advanced laser
melting printers. One director has suggested using additional debt because debt is cheaper
than equity. Another director has argued that, according to Modigliani and Miller, the method
of financing should not affect the value of Kwirtmak.

I need your advice on two matters:

● Firstly, explain the relevance of Modigliani and Miller’s capital structure theory to
Kwirtmak’s financing decision.
[sub-task (a) = 50%]

● Secondly, evaluate whether Kwirtmak should finance the new facility using additional
debt.
[sub-task (b) = 50%]

Answer (a) — Relevance of M&M theory

Modigliani and Miller’s theory is relevant because it considers whether a company’s value is
affected by its mix of debt and equity. In the basic M&M theory without tax, the value of a
company is independent of its capital structure. This means that, in a perfect market,
Kwirtmak’s value would depend on the cash flows generated by its 3D printer business, not
on whether the new factory is financed by debt or equity.

However, the assumptions of M&M without tax are unrealistic for Kwirtmak. It assumes no
tax, no bankruptcy costs, no transaction costs and perfect information. In reality, Kwirtmak is
a quoted company operating in a risky technology-based industry, and investors will consider
financial risk when valuing the company.
M&M with corporate tax is more relevant because debt interest is normally tax-deductible.
This creates a tax shield, which means that using debt can increase company value.
Therefore, one director is partly correct that debt may be attractive because it is cheaper than
equity and may reduce WACC.

However, M&M also helps explain why excessive debt can be dangerous. As gearing
increases, shareholders face higher financial risk because interest must be paid before
dividends. Shareholders will therefore demand a higher return, increasing the cost of equity.
Lenders may also demand higher interest rates if they believe Kwirtmak is becoming too
risky.

For Kwirtmak, this is important because the company already has borrowings of E$1,350m
and its profit fell in 2026. Therefore, although debt may provide tax benefits, additional debt
could increase financial risk and reduce shareholder confidence.

Conclusion for (a):

M&M theory is useful because it shows that debt can reduce WACC through tax benefits, but
only up to a point. In reality, Kwirtmak must also consider bankruptcy risk, shareholder risk,
lender confidence and financial flexibility.

Answer (b) — Whether Kwirtmak should use additional debt

Kwirtmak should be cautious about financing the new facility using additional debt. Debt
may be attractive because it is usually cheaper than equity and avoids dilution of existing
shareholders. If the factory generates strong cash flows, debt finance could improve returns to
shareholders.

Debt may also be suitable if the new facility produces printers that are already part of
Kwirtmak’s product range. Laser melting printers are not completely new to Kwirtmak, so
the project may have a lower risk than entering a totally new market.

However, additional debt would increase financial gearing. This is a concern because
Kwirtmak already has E$1,350m of borrowings. If the new factory takes time to generate
profits, Kwirtmak will still need to pay interest. This could put pressure on cash flow.

Kwirtmak’s profit has also declined, which may make lenders and shareholders more
cautious. If operating profit falls further, interest cover may weaken. This could increase the
risk of financial distress.

The Board should also consider Kwirtmak’s high beta of 2.3. This indicates that shareholders
already perceive Kwirtmak as risky. More debt would increase equity risk further, possibly
increasing the cost of equity and reducing the benefit of cheaper debt.

Kwirtmak should therefore not finance the whole project with debt. A more balanced
approach may be better, such as part debt, part retained earnings or part rights issue. This
would allow Kwirtmak to benefit from some debt tax shield while controlling financial risk.
Conclusion for (b):
Kwirtmak may use some debt, but it should avoid excessive gearing. The factory should only
proceed if it has a positive NPV using a risk-adjusted WACC and if forecast cash flows can
comfortably cover interest payments.

Question 2 — Risk Register for Volatile Demand

Exam-style question

From: Agata Paluch, Chief Financial Officer

To: Senior Finance Manager
Subject: Demand volatility risk

Hello,

I have attached an extract from Kwirtmak’s risk register.

The risk register states that demand for Kwirtmak’s 3D printers can be volatile and that this
may lead to overinvestment in inventory if forecast sales do not materialise. The current
mitigation is that the Marketing Department maintains good relationships with major
customers and keeps customers informed of new products.

I need your advice on two matters:

● Firstly, evaluate the adequacy of the current risk register mitigation for volatile sales
demand.
[sub-task (a) = 50%]

● Secondly, recommend further actions that Kwirtmak should take to manage the risk
of volatile demand.
[sub-task (b) = 50%]

Answer (a) — Evaluate current mitigation

The current mitigation is useful because maintaining good relationships with major customers
can help Kwirtmak understand future demand. Since Kwirtmak sells commercial 3D printers
to customers in aerospace, automotive, consumer electronics and jewellery, regular
communication with customers can help identify changes in investment plans.

Keeping customers informed of new products is also useful because it may stimulate demand.
For example, if customers are aware of new laser melting or material jetting printers, they
may be more likely to place orders.

However, the mitigation appears incomplete. Good customer relationships do not remove
demand volatility. Customers may still delay purchases if they face their own financial
pressures, change strategy, or choose competitors such as Breskko. Therefore, the current
mitigation may reduce uncertainty but cannot fully control the risk.

The risk register also appears too focused on sales activity. Demand volatility affects more
than marketing. It can affect production planning, inventory levels, supplier contracts, cash
flow forecasts and investment decisions. Therefore, Operations, Finance, Treasury and
Procurement should also be involved.

The mitigation also does not clearly mention early warning indicators. Kwirtmak should
monitor order pipelines, customer enquiries, cancellation rates, competitor pricing and
macroeconomic trends. Without these indicators, the Board may react too late.

There is also no mention of scenario planning. Since demand for 3D printers can be
uncertain, Kwirtmak should consider best case, base case and worst case demand forecasts.
This would help avoid overproduction and excessive inventory.

Conclusion for (a):

The current mitigation is helpful but too narrow. It relies heavily on customer relationships
and does not sufficiently address forecasting, inventory control, financial planning or
scenario analysis.

Answer (b) — Further actions to manage demand volatility

Kwirtmak should improve demand forecasting by combining customer relationship

information with data analytics. It should analyse order history, enquiry levels, industry
trends and customer investment cycles. This would make forecasts more reliable.

The company should also use scenario planning. For example, it could prepare forecasts for
strong demand, moderate demand and weak demand. This would help the Board decide how
much inventory to hold and whether to delay or accelerate investment.

Kwirtmak should also use flexible production planning. If production can be adjusted
quickly, the company can reduce the risk of overproducing printers that customers do not
buy. This may involve flexible labour arrangements or modular manufacturing processes.

Inventory controls should also be strengthened. Kwirtmak should set maximum inventory
levels, monitor slow-moving inventory and avoid building high levels of finished goods
unless there are confirmed customer orders.

The company should also diversify revenue streams. A materials subscription model,
maintenance contracts or software support could reduce dependence on one-off printer sales.
This would help stabilise revenue.

Kwirtmak should also monitor competitor activity, especially Breskko. If Breskko reduces
prices or launches new products, Kwirtmak’s demand may fall. Competitor intelligence
should therefore be part of the risk management process.
Finance should also prepare cash flow forecasts under different demand scenarios. This
would help Kwirtmak avoid liquidity pressure if sales fall.

Conclusion for (b):

Kwirtmak should manage demand volatility through better forecasting, scenario planning,
flexible production, inventory controls, recurring revenue, competitor monitoring and cash
flow planning.

Question 3 — EMH and Share Price Reaction to Quality Failure

Exam-style question

From: Agata Paluch, Chief Financial Officer

To: Senior Finance Manager
Subject: Share price reaction

Hello,

I have attached a news article that has just gone online.

The article states that one of Kwirtmak’s automotive customers has suspended use of a
Kwirtmak laser melting printer after discovering that some printed components did not meet
agreed strength requirements. Kwirtmak’s share price fell shortly after the article was
released.

I need your advice on two matters:

● Firstly, explain how the efficient market hypothesis may explain the fall in
Kwirtmak’s share price.
[sub-task (a) = 50%]

● Secondly, recommend how Kwirtmak should communicate with the market following
this announcement.
[sub-task (b) = 50%]

Answer (a) — EMH and share price fall

The efficient market hypothesis states that share prices reflect available information. If the
market is semi-strong efficient, publicly available information such as news articles, financial
statements and company announcements will be reflected quickly in the share price.

The fall in Kwirtmak’s share price can therefore be explained by investors reacting to new
public information about a possible product quality failure. Investors may believe that the
incident could lead to compensation claims, loss of customer confidence, additional warranty
costs or reputational damage.
The reaction may be stronger because Kwirtmak’s products are complex and used in
commercial applications. If printed components do not meet strength requirements, customers
in automotive, aerospace or medical sectors may become concerned about safety and
reliability.

Kwirtmak’s high beta of 2.3 may also amplify the reaction. A high beta indicates that the
share price is already sensitive to risk and market movements. Therefore, negative news may
lead to a larger fall in share price.

However, the size of the share price reaction depends on whether the news contains new
information. If investors were already aware of quality concerns, the share price may have
already reflected this risk. If the issue is new and unexpected, the market reaction may be
stronger.

The market may also overreact in the short term if the article is incomplete or unclear. For
example, if the defect affects only one printer but investors fear a wider quality problem, the
share price may fall more than justified.

Conclusion for (a):

Under semi-strong EMH, the share price fall reflects the market quickly incorporating new
public information about product quality risk. The fall may be larger because Kwirtmak is
already viewed as risky.

Answer (b) — Communication with the market

Kwirtmak should communicate quickly and transparently. Silence may allow rumours to
develop and may make investors assume that the problem is worse than it is.

The company should issue a factual statement confirming that it is aware of the issue, that it
is investigating, and that customer safety and product quality are priorities. It should avoid
making unsupported claims before the technical investigation is complete.

Kwirtmak should explain the scope of the issue as soon as it is known. If the problem is
limited to one customer, one printer or one batch of materials, this should be communicated.
This would help reduce uncertainty and may limit further share price decline.

The company should also state what action is being taken. This may include sending
technical staff to the customer, testing similar printers, reviewing supplier materials, or
issuing a software update. Investors are more likely to be reassured if they see clear action.

Kwirtmak must ensure that all price-sensitive information is released fairly to the market. It
should not provide selective information to only some investors or analysts.

The Board should also avoid overpromising. If Kwirtmak says that the issue is minor and
later discovers a wider problem, credibility will be damaged. It is better to communicate
carefully and update the market as facts become available.
Conclusion for (b):
Kwirtmak should issue a prompt, factual and balanced statement, explain the investigation
and actions being taken, and update the market when reliable information is available.

Question 4 — EMH and No Share Price Movement After Announcement

Exam-style question

From: Agata Paluch, Chief Financial Officer

To: Senior Finance Manager
Subject: Market reaction to new printer launch

Hello,

I have attached a press release announcing Kwirtmak’s new energy-efficient extrusion

printer. The printer reduces energy consumption when printing with PLA and is expected to
support Kwirtmak’s sustainability strategy.

The Board expected the announcement to increase Kwirtmak’s share price, but the share
price has not changed significantly.

I need your advice on two matters:

● Firstly, explain why Kwirtmak’s share price may not have changed after the
announcement, using the efficient market hypothesis.
[sub-task (a) = 50%]

● Secondly, evaluate whether the lack of share price movement means that investors do
not value Kwirtmak’s sustainability strategy.
[sub-task (b) = 50%]

Answer (a) — Why share price may not change under EMH

Under the efficient market hypothesis, share prices reflect available information. If the
market is semi-strong efficient, public announcements will affect share price only if they
contain new information that changes investors’ expectations of future cash flows or risk.

Kwirtmak’s share price may not have changed because investors may already have expected
the new printer. The pre-seen already states that Kwirtmak pays attention to improving
sustainability and has reduced energy consumption when printing with PLA. Therefore, the
announcement may not be surprising.
The announcement may also lack financial detail. Investors may not know whether the new
printer will generate significant revenue, improve margins or increase market share. If the
press release contains only technical or sustainability claims, the market may wait for sales
evidence before changing the share price.

Another reason is that the financial impact may be too small to affect the value of the whole
company. Kwirtmak is a large group with revenue of E$2,320m in 2026. One new printer
may not materially affect total expected cash flows.

Investors may also be cautious because Kwirtmak’s overall performance has declined. Even
if the new printer is positive, investors may still worry about demand volatility, competition
from Breskko and high business risk.

Conclusion for (a):

The lack of share price movement does not mean the announcement is irrelevant. It may
simply mean the market had already expected it or that the announcement did not provide
enough new financial information.

Answer (b) — Does lack of movement mean investors do not value sustainability?

The lack of share price movement does not necessarily mean investors do not value
sustainability. Investors may value sustainability, but they also need evidence that it will
improve cash flows, reduce risk or create competitive advantage.

For example, an energy-efficient printer could be valuable if customers are willing to pay a
premium, if it increases market share, or if it reduces regulatory risk. However, if Kwirtmak
has not provided sales forecasts or customer commitments, investors may not yet adjust their
valuation.

Sustainability may also be valued as a long-term risk reduction factor rather than an
immediate profit driver. Investors may recognise that better energy efficiency supports
Kwirtmak’s reputation, customer relationships and regulatory compliance, but these benefits
may not immediately affect the share price.

The Board should also consider that investors may be concerned about greenwashing. If
sustainability claims are not supported by detailed evidence, investors may be cautious.
Kwirtmak should therefore provide metrics, such as energy savings, recyclability and
customer adoption.

The share price may change later if the product leads to confirmed orders or improved
margins. Under EMH, the market will react when credible new information becomes
available.

Conclusion for (b):

The lack of immediate share price movement does not prove that investors reject the
sustainability strategy. It means investors may need clearer evidence of financial benefits
before changing their valuation.
Question 5 — International Expansion Risk

Exam-style question

From: Agata Paluch, Chief Financial Officer

To: Senior Finance Manager
Subject: Overseas factory proposal

Hello,

I have forwarded an email from Kristina Eder, our Operations Director.

Kristina believes that Kwirtmak should build a new factory overseas to be closer to customers
in Asia and reduce transportation times. The factory would manufacture extrusion and laser
melting printers for regional customers.

I need your advice on two matters:

● Firstly, evaluate the international risks that Kwirtmak should consider before
expanding production overseas.
[sub-task (a) = 60%]

● Secondly, recommend how Kwirtmak should manage these international risks.

[sub-task (b) = 40%]

Answer (a) — International risks

The first international risk is foreign exchange risk. The overseas factory may create costs in
a foreign currency, while group reporting is in E$. If exchange rates move unfavourably,
Kwirtmak’s profits and cash flows may be affected.

There is also political risk. The overseas country may change tax rules, labour laws, import
duties or environmental regulations. This could increase costs or make the factory less
attractive.

Legal and regulatory risk is important. Kwirtmak manufactures complex industrial

equipment, and its products may be subject to health, safety and environmental laws. If the
overseas country has different requirements, Kwirtmak may need to adapt its production
processes.

Supply chain risk may also increase. The factory may depend on local suppliers for
components or materials. If supplier quality is poor, Kwirtmak’s printers may suffer quality
problems. This is serious because Kwirtmak’s risk register identifies supplier quality and
availability as principal risks.
There is also operational risk. Kwirtmak may find it difficult to recruit skilled staff with
experience in 3D printing technology. Poor training or weak controls could lead to product
defects.

Cultural and management risk should also be considered. Managing staff, suppliers and
customers in a different country may require different communication styles and management
practices.

Reputational risk is also relevant. If the overseas factory has poor labour practices, safety
issues or environmental problems, Kwirtmak’s global reputation could suffer.

Tax risk may arise if profits are earned overseas and transferred back to Ennland. Transfer
pricing rules and withholding taxes could affect the expected financial benefit.

Conclusion for (a):

Overseas expansion could reduce transport time and support customer service, but it exposes
Kwirtmak to foreign exchange, political, legal, supply chain, operational, cultural,
reputational and tax risks.

Answer (b) — Managing international risks

Kwirtmak should perform a detailed country risk assessment before choosing the location.
This should consider political stability, legal system, tax rules, infrastructure, labour skills
and environmental regulation.

Foreign exchange risk should be managed through treasury controls. Kwirtmak could use
natural hedging by matching local revenues with local costs. It could also use forward
contracts or options for major foreign currency exposures.

Supply chain risk should be managed through supplier due diligence. Kwirtmak should audit
suppliers, set quality standards and avoid dependence on one supplier where possible.

Operational risk should be managed through strong training and quality control. Kwirtmak
should send experienced managers from existing factories to support the new operation
during the start-up period.

Legal and regulatory risk should be managed by obtaining local legal advice and ensuring
compliance with all safety, labour and environmental laws.

Reputational risk should be managed by applying Kwirtmak’s group standards to the

overseas factory. The company should not allow lower standards simply because local
regulation may be weaker.

Tax risk should be managed through advice from international tax specialists. Transfer
pricing policies should be documented and commercially justifiable.

Conclusion for (b):

Kwirtmak should manage international risks through country risk assessment, treasury
hedging, supplier controls, staff training, legal compliance, group-wide ethical standards and
tax planning.

Question 6 — Political Risk and Local Production

Exam-style question

From: Agata Paluch, Chief Financial Officer

To: Senior Finance Manager
Subject: Local production requirement

Hello,

I have forwarded a news article that has just gone online.

The government of a country where Kwirtmak has many customers is considering new rules
that would give preference to suppliers that manufacture locally. This could affect
Kwirtmak’s ability to sell printers into that country unless it builds a local assembly facility.

I need your advice on two matters:

● Firstly, evaluate the political risks that Kwirtmak faces if it continues exporting
printers into that country from its existing factories.
[sub-task (a) = 50%]

● Secondly, evaluate whether building a local assembly facility would reduce or increase
Kwirtmak’s political risk.
[sub-task (b) = 50%]

Answer (a) — Political risks if Kwirtmak continues exporting

Kwirtmak may face market access risk if the government gives preference to local
manufacturers. Customers may choose local suppliers because they receive government
support or because imported printers become less attractive.

There is also tariff risk. The government may impose import duties on foreign-made
industrial equipment. This would make Kwirtmak’s printers more expensive and reduce
competitiveness.
Regulatory risk may also increase. The government may introduce technical standards,
certification requirements or procurement rules that favour local producers. Even if
Kwirtmak’s printers are high quality, it may lose sales if rules are designed to support
domestic industry.

There is also reputational risk. Kwirtmak may be seen as a foreign company that sells into the
country without contributing jobs or tax revenues. This could weaken relationships with
government and customers.

There is also strategic risk. If competitors build locally and Kwirtmak does not, competitors
may become preferred suppliers. This could reduce Kwirtmak’s market share.

Conclusion for (a):

Continuing to export may expose Kwirtmak to tariffs, procurement restrictions, regulatory
barriers, reputational risk and loss of market share.

Answer (b) — Would local assembly reduce or increase political risk?

Building a local assembly facility could reduce political risk because Kwirtmak would be
seen as contributing to the local economy. The facility could create jobs, pay local taxes and
support local suppliers. This may improve the company’s relationship with the government.

It could also improve market access. If local production is preferred in procurement

decisions, Kwirtmak may be more likely to win contracts.

However, local assembly could also increase political risk. Once Kwirtmak has physical
assets in the country, it becomes more exposed to changes in local laws, taxes, labour
regulation and environmental requirements.

There may also be risk of government pressure. For example, the government may expect
Kwirtmak to transfer technology, employ local managers or use local suppliers even if quality
is lower.

The facility may also expose Kwirtmak to foreign exchange and repatriation risk. If profits
cannot easily be transferred back to Ennland, the financial benefit may be reduced.

Therefore, local assembly may reduce market access risk but increase exposure to local
political and operational risk.

Conclusion for (b):

A local assembly facility may reduce the risk of losing sales due to local preference rules, but
it also increases exposure to local regulation, taxation, labour issues and government
pressure. Kwirtmak should proceed only after country risk analysis and careful legal advice.

Question 7 — Risk Register for Cybersecurity

Exam-style question

From: Agata Paluch, Chief Financial Officer

To: Senior Finance Manager
Subject: Cybersecurity risk register

Hello,

I have attached an extract from Kwirtmak’s risk register.

The Board is concerned that the risk register does not clearly identify cybersecurity risks,
even though Kwirtmak’s printers depend on software and are linked to customers’ CAD
systems.

I need your advice on two matters:

● Firstly, evaluate why cybersecurity should be included as a significant risk in

Kwirtmak’s risk register.
[sub-task (a) = 50%]

● Secondly, recommend suitable risk mitigations that should be included in the risk
register.
[sub-task (b) = 50%]

Answer (a) — Why cybersecurity should be in the risk register

Cybersecurity should be included because Kwirtmak’s products rely on both hardware and
software. Its printers interact with CAD systems, and customers may send confidential design
files to the printers. A cyber-attack could therefore affect both Kwirtmak and its customers.

Customer design files may contain valuable intellectual property. For example, aerospace,
automotive and consumer electronics customers may use CAD files for new products or
mission-critical parts. If these files are stolen, customers may suffer losses and may claim
compensation from Kwirtmak.

Cybersecurity risk could also affect product quality. If hackers interfere with printer software
or CAD instructions, printed components may be defective. This could be very serious if the
components are used in aerospace, automotive or medical applications.

There is also reputational risk. Kwirtmak’s reputation is based on quality and technical
advice. A major cyber incident could damage trust and make customers choose competitors.

Regulatory risk may also arise. Data protection and cybersecurity laws may require
Kwirtmak to notify regulators and affected customers if data is breached.

The risk register should include cybersecurity because it is connected to several existing
principal risks, including product quality, customer disruption and legal compliance.
Conclusion for (a):
Cybersecurity is a significant risk because it could affect customer data, printer output,
product safety, legal compliance and Kwirtmak’s reputation.

Answer (b) — Suitable mitigations

Kwirtmak should introduce strong access controls, including multi-factor authentication for
employees and customers accessing sensitive systems.

Customer CAD files should be encrypted when stored and transmitted. This would reduce the
damage if unauthorised access occurs.

The company should conduct regular penetration testing by independent cybersecurity

specialists. This would identify weaknesses before attackers exploit them.

Kwirtmak should also introduce secure software development procedures. Printer software
and CAD interfaces should be tested for vulnerabilities before release.

The company should maintain incident response plans. These should explain how to isolate
affected systems, notify customers, preserve evidence and restore operations.

Employee training is also important because many cyber-attacks begin with phishing emails
or weak passwords. Staff should be trained to recognise and report threats.

Internal audit should review compliance with cybersecurity controls and report weaknesses to
the Audit Committee.

Conclusion for (b):

The risk register should include mitigations such as access controls, encryption, penetration
testing, secure software development, incident response planning, staff training and internal
audit review.
1. Ansoff Matrix — Growth Strategy

Possible exam question

From: Agata Paluch, Chief Financial Officer

To: Senior Finance Manager
Subject: FWD: Growth opportunities

Hello,

I have forwarded an email from David Wallace, our CEO.

David believes that Kwirtmak must respond to the fall in revenue and profit by pursuing
growth. He has identified four possible options:

1. Sell more existing printers to current industrial customers.

2. Develop new carbon fibre printers for existing aerospace and automotive customers.
3. Enter the medical 3D printing market.
4. Acquire a software company that develops CAD and 3D scanning technology.

I need your advice on two matters:

● Firstly, evaluate these growth options using Ansoff’s Matrix.

[sub-task (a) = 60%]

● Secondly, recommend which option Kwirtmak should prioritise.

[sub-task (b) = 40%]

Answer (a) — Evaluate using Ansoff’s Matrix

Ansoff’s Matrix helps Kwirtmak evaluate growth options by considering whether the
company is selling existing or new products to existing or new markets. This is useful
because Kwirtmak is facing weaker financial performance, with revenue and profit falling in
2026. Therefore, the Board needs to identify growth strategies that can improve future
shareholder value.
The first option, selling more existing printers to current industrial customers, is market
penetration. This is the lowest-risk option because Kwirtmak already understands its
existing products and customers. It already sells extrusion, stereolithography, DLP, laser
melting and material jetting printers to customers in aerospace, automotive, consumer
electronics and jewellery. Therefore, the company could increase sales through stronger
customer relationships, better after-sales support, service packages or pricing incentives.

However, market penetration may have limited growth potential. If demand for commercial
3D printers is volatile, selling more of the same products may be difficult. Kwirtmak also
faces competition from Breskko, which sells a similar range of products. Therefore, market
penetration is relatively safe but may not be enough to reverse the decline in performance.

The second option, developing carbon fibre printers for existing aerospace and automotive
customers, is product development. This means selling a new product to existing markets.
This option fits Kwirtmak well because aerospace and automotive customers already use 3D
printing and may value lightweight and strong components. Carbon fibre printing could
strengthen Kwirtmak’s differentiation strategy and reduce reliance on price competition.

However, product development carries technical risk. Kwirtmak would need R&D
investment, testing and possibly new supplier relationships. If the technology does not meet
customer requirements for strength, accuracy and safety, the project could fail. This is
especially important because aerospace and automotive customers may use printed parts in
safety-sensitive applications.

The third option, entering the medical 3D printing market, is market development if
Kwirtmak sells existing or adapted printer technology to a new market. Medical customers
such as hospitals, dentists and laboratories may need accurate customised components. This
could provide a new source of growth and diversify Kwirtmak’s revenue.

However, this option carries higher risk because the medical market has strict regulatory
requirements. The pre-seen states that materials used in medical applications must be
approved before use with patients. Therefore, Kwirtmak would need strong quality assurance,
compliance processes and customer training.

The fourth option, acquiring a CAD and 3D scanning software company, may be seen as
diversification because Kwirtmak would move beyond printer manufacturing into software
and scanning technology. This could create strategic benefits because 3D scanning supports
the design process by allowing customers to scan existing objects, edit them in CAD software
and print replacement parts.

However, diversification is the highest-risk Ansoff option. Kwirtmak may face integration
risk, software compatibility problems and the risk of overpaying for the acquisition. The
company would also need to retain key technical staff.

Overall, Ansoff shows that market penetration is lowest risk, product development offers
strong strategic fit, market development offers diversification of customers, and acquisition-
led diversification carries the highest risk.
Answer (b) — Recommend which option to prioritise

Kwirtmak should prioritise product development, specifically developing carbon fibre

printers for existing aerospace and automotive customers.

This is because it balances growth and risk. It is more ambitious than market penetration but
less risky than entering a completely new market or acquiring a software company. Kwirtmak
already understands aerospace and automotive customers, and those customers already value
strength, accuracy and high-performance materials.

This option also supports Kwirtmak’s mission to transform customers through innovation in
design and production. It would allow Kwirtmak to maintain its premium positioning by
offering advanced technology rather than competing only on price with Breskko.

However, the project should be developed in stages. Kwirtmak should first conduct market
research with key aerospace and automotive customers, then develop prototypes, then run
customer trials before full launch. This would reduce technical and financial risk.

Market penetration should continue in parallel because it can protect existing revenue.
Kwirtmak should also keep the medical market as a medium-term opportunity, but should not
enter it too quickly due to regulatory and patient safety risks.

Conclusion: Kwirtmak should prioritise product development through carbon fibre printers
because it gives growth potential while still using existing customer relationships and
technical knowledge.

2. BCG Matrix — Product Portfolio

Possible exam question

From: Agata Paluch, Chief Financial Officer

To: Senior Finance Manager
Subject: FWD: Product portfolio review

Hello,

I have forwarded an email from Ouyang Qi, our Marketing Director.

Ouyang is concerned that Kwirtmak sells many different types of 3D printers, including
extrusion, stereolithography, DLP, laser melting and material jetting printers. Some directors
believe that Kwirtmak should focus investment on high-growth printer types and stop
supporting older product lines.

I need your advice on two matters:

● Firstly, evaluate how the BCG Matrix could help Kwirtmak review its printer
portfolio.
[sub-task (a) = 50%]
● Secondly, discuss the limitations of using the BCG Matrix for this decision.
[sub-task (b) = 50%]

Answer (a) — How BCG Matrix can help

The BCG Matrix can help Kwirtmak review its printer portfolio by classifying each product
line according to market growth and relative market share. This would help the Board
decide where to invest, where to maintain, and where to reduce resources.

Printers with high market growth and high market share would be classified as stars. For
Kwirtmak, advanced printers such as laser melting or material jetting may fall into this
category if demand is growing strongly and Kwirtmak has a strong competitive position.
These printers may deserve further investment because they can create future growth and
strengthen Kwirtmak’s reputation for innovation.

Printers with low market growth but high market share would be cash cows. Some
established extrusion printers may fall into this category. Extrusion is one of the most
recognisable 3D printing technologies, and Kwirtmak has manufactured extrusion printers
since its early years. If the market is mature but Kwirtmak still has strong sales, these printers
could generate steady cash flow. That cash could then fund investment in newer technologies.

Printers with high market growth but low market share would be question marks. For
example, if medical 3D printers or carbon fibre printers become high-growth areas but
Kwirtmak has not yet built a strong position, these may be question marks. The Board would
need to decide whether to invest heavily to build market share or avoid committing too much
cash.

Printers with low market growth and low market share would be dogs. If any older printer
types are no longer competitive and generate little profit, Kwirtmak may consider
withdrawing them. However, it should assess customer relationships before doing so because
some customers may still rely on older printers and buy materials or maintenance services.

The BCG Matrix can therefore help Kwirtmak allocate resources more clearly. This is
important because Kwirtmak’s profit has declined, so it cannot invest equally in every
product line.

Answer (b) — Limitations of BCG Matrix

The BCG Matrix is useful but has limitations. The first limitation is that it oversimplifies
strategy into only two factors: market growth and relative market share. Kwirtmak’s product
decisions are more complex because printer lines differ in quality, accuracy, materials,
customer needs, technical support requirements and regulatory risks.

The second limitation is that it may be difficult to define the market. For example, should
Kwirtmak assess “3D printers” as one market, or separate markets such as laser melting
printers, material jetting printers, medical printers and aerospace printers? The classification
may change depending on how the market is defined.

The third limitation is that low-growth products may still be strategically important. An older
extrusion printer may not be high-growth, but it may support long-term customers and
generate materials revenue. Removing it could damage customer relationships.

The fourth limitation is that high-growth markets are not always attractive. Medical 3D
printing may grow quickly, but it also carries regulatory and product liability risks. The BCG
Matrix does not fully capture these risks.

The fifth limitation is that market share does not always guarantee profitability. Kwirtmak
may have high market share in a product line but low margins if competition is intense.
Similarly, a low-share niche product may be highly profitable.

Therefore, Kwirtmak should use the BCG Matrix as a starting point, not as the final decision
tool. It should also consider profitability, cash flow, customer relationships, strategic fit, risk
and NPV.

Conclusion: The BCG Matrix can help Kwirtmak structure its portfolio review, but the
Board should not rely on it alone.

3. Porter’s Diamond — Overseas Factory Location

Possible exam question

From: Agata Paluch, Chief Financial Officer

To: Senior Finance Manager
Subject: FWD: Overseas factory location

Hello,

I have forwarded an email from Kristina Eder, our Operations Director.

Kristina believes that Kwirtmak should build a factory in another country to manufacture
commercial 3D printers closer to customers in Asia. She has asked whether Porter’s Diamond
could help assess whether that country would provide a competitive advantage.

I need your advice on two matters:

● Firstly, evaluate how Porter’s Diamond could help Kwirtmak assess the attractiveness
of the proposed overseas location.
[sub-task (a) = 60%]

● Secondly, discuss the international risks that Kwirtmak should consider before
building the overseas factory.
[sub-task (b) = 40%]
Answer (a) — Porter’s Diamond

Porter’s Diamond can help Kwirtmak assess whether the proposed overseas country would
support competitive advantage. It considers four main factors: factor conditions, demand
conditions, related and supporting industries, and firm strategy, structure and rivalry.

The first factor is factor conditions. Kwirtmak would need skilled engineers, technicians,
software specialists and production staff to manufacture complex 3D printers. If the overseas
country has strong technical education, engineering skills and reliable infrastructure, it may
be attractive. However, if skilled labour is limited, quality problems may arise.

The second factor is demand conditions. Kwirtmak should assess whether there is strong
local or regional demand for commercial 3D printers. If aerospace, automotive, electronics or
medical industries are growing in the region, local demand may support the factory. Strong
local customers may also push Kwirtmak to improve its products.

The third factor is related and supporting industries. Kwirtmak depends on suppliers of
components, printer materials, software support, logistics and maintenance services. If the
country has strong supplier networks and advanced manufacturing clusters, Kwirtmak may
benefit from lower costs and faster supply. However, poor supplier quality would increase
operational risk.

The fourth factor is firm strategy, structure and rivalry. If the local market has strong
competition, Kwirtmak may be forced to innovate and improve efficiency. However, intense
rivalry may also reduce margins. Kwirtmak should assess whether competitors such as
Breskko already have a local presence.

Government also plays an important supporting role. Tax incentives, grants, import rules and
environmental regulations could affect the attractiveness of the location. If the government
encourages advanced manufacturing, the location may be more attractive.

Chance events should also be considered. Political instability, currency volatility or supply
chain disruption could affect the factory.

Overall, Porter’s Diamond helps Kwirtmak assess whether the overseas location can support
long-term competitive advantage, not just whether it offers low labour costs.

Answer (b) — International risks

Kwirtmak should consider foreign exchange risk. The factory may incur costs in a foreign
currency, while group reporting is in E$. Exchange rate movements could affect profit and
cash flow.

Political risk is also important. The overseas government may change tax rules, labour laws,
import duties or environmental regulations. This could increase costs or reduce expected
benefits.
Supply chain risk may increase if Kwirtmak depends on local suppliers. Poor-quality
components could affect printer reliability, which is serious because Kwirtmak’s printers are
complex and quality failures may damage customers.

Operational risk is also relevant. Kwirtmak may find it difficult to maintain the same quality
standards in a new country. It may need to send experienced managers from existing factories
to supervise production and training.

Cultural risk may affect management style, communication and employee relations.
Kwirtmak must understand local business practices while maintaining group standards.

Reputational risk should also be considered. If the factory has poor labour or environmental
practices, Kwirtmak’s global reputation could suffer.

Tax and transfer pricing risks may arise if profits are moved between countries. Kwirtmak
should obtain professional tax advice and ensure that transfer pricing is properly documented.

Conclusion: The overseas factory may improve customer service and reduce transport time,
but Kwirtmak must manage foreign exchange, political, supplier, operational, cultural,
reputational and tax risks.

4. Porter’s Five Forces — Competitive Position

Possible exam question

From: Agata Paluch, Chief Financial Officer

To: Senior Finance Manager
Subject: FWD: Competitive pressure

Hello,

I have forwarded a market report stating that competition in industrial 3D printers is

increasing. Breskko has reduced prices on several printer models, and several overseas
competitors are launching new high-speed printers.

I need your advice on two matters:

● Firstly, evaluate the competitive pressures facing Kwirtmak using Porter’s Five
Forces.
[sub-task (a) = 60%]

● Secondly, recommend how Kwirtmak should respond to these competitive pressures.

[sub-task (b) = 40%]

Answer (a) — Porter’s Five Forces

Porter’s Five Forces can help Kwirtmak assess the attractiveness of the industrial 3D printer
industry.

The first force is competitive rivalry. Rivalry appears high because Kwirtmak has a close
competitor, Breskko, which sells a similar range of printers and materials. Breskko’s stronger
performance and price reductions may put pressure on Kwirtmak’s sales and margins.

The second force is buyer power. Buyer power may be high because Kwirtmak sells to
commercial customers such as aerospace, automotive and consumer electronics companies.
These customers may be large, technically knowledgeable and able to compare suppliers. If
they place large orders, they may negotiate hard on price, service and warranty terms.

The third force is supplier power. Supplier power may be significant because Kwirtmak
relies on third-party suppliers for printer parts, materials and spare parts. If suppliers provide
defective or delayed components, Kwirtmak’s operations and customer service could be
disrupted.

The fourth force is threat of substitutes. Traditional manufacturing methods such as

machining and moulding are substitutes. For mass production, traditional methods may be
cheaper than 3D printing. Therefore, customers may choose traditional manufacturing if they
do not need customisation or complex shapes.

The fifth force is threat of new entrants. Entry barriers may be high because commercial 3D
printers require technical knowledge, R&D, quality control and customer support. However,
technology companies or large customers could enter if they have sufficient resources.

Overall, Porter’s Five Forces suggest that Kwirtmak faces significant pressure from
competitors, powerful customers, supplier dependence and substitute manufacturing methods.

Answer (b) — Recommended response

Kwirtmak should avoid competing mainly on price because this could damage margins and
weaken its premium positioning. Instead, it should differentiate through quality, technical
advice, reliability and advanced technology.

Kwirtmak should strengthen relationships with major customers. It should understand their
needs and offer tailored solutions, training, maintenance and materials support.

The company should also invest in innovation. New products such as carbon fibre printers,
energy-efficient printers or medical printers could help Kwirtmak stay ahead of competitors.

Supplier risk should be reduced through supplier audits, dual sourcing and quality
agreements. This would help protect product reliability.

Kwirtmak could also increase recurring revenue through materials subscriptions, maintenance
contracts and software support. This would reduce reliance on one-off printer sales.
Conclusion: Kwirtmak should respond by differentiating, innovating, strengthening customer
relationships and improving supplier control rather than entering a price war.

5. SAF Model — Strategic Option Evaluation

Possible exam question

From: Agata Paluch, Chief Financial Officer

To: Senior Finance Manager
Subject: FWD: Strategic options

Hello,

The Board has identified three possible strategic options:

1. Build a new overseas factory.

2. Acquire a 3D scanning software company.
3. Develop medical 3D printers.

I need your advice on two matters:

● Firstly, evaluate these options using the suitability, acceptability and feasibility
criteria.
[sub-task (a) = 60%]

● Secondly, recommend which option Kwirtmak should pursue first.

[sub-task (b) = 40%]

Answer (a) — SAF evaluation

The overseas factory may be suitable because Kwirtmak sells globally and may benefit from
being closer to customers. It could reduce delivery time and transport-related emissions.
However, it may expose Kwirtmak to international risks.

It may be feasible if Kwirtmak has the financial and management resources. However, its
profit has fallen, and the factory may require significant capital investment. Skilled labour
and supplier quality in the chosen country must also be assessed.

It may be acceptable to customers if it improves delivery and local support. Shareholders

may accept it if it creates value, but they may be concerned about risk and cost.

The acquisition of a 3D scanning company may be suitable because scanning supports CAD
design and 3D printing. It could allow Kwirtmak to offer a complete solution.

It may be feasible if the acquisition price is affordable and the technology is compatible.
However, Kwirtmak must retain key software staff.
It may be acceptable to shareholders if it creates synergies, but they may worry about
overpayment and integration risk.

Developing medical 3D printers may be suitable because medical customers need accurate
customised components. It supports innovation and market development.

It may be feasible if Kwirtmak can meet regulatory requirements and develop safe materials.
However, medical applications require strict testing and approval.

It may be acceptable because it could create growth and reputation benefits, but product
liability risk is high.

Overall, all three options are strategically possible, but they carry different levels of risk.

Answer (b) — Recommendation

Kwirtmak should pursue the acquisition of a 3D scanning company first, provided due
diligence confirms that the price is fair and the technology is compatible.

This option has strong strategic fit because it complements Kwirtmak’s existing printers and
materials. It could also support many customer segments, not only one market. For example,
aerospace, automotive and jewellery customers could all benefit from scanning existing parts
and printing improved versions.

It may also be less risky than medical printing because it does not immediately expose
Kwirtmak to patient safety risks. It may also be less capital-intensive than building a new
overseas factory.

However, Kwirtmak should proceed carefully. It should use NPV valuation, assess software
compatibility, and introduce retention plans for key staff.

Conclusion: The acquisition should be prioritised because it strengthens Kwirtmak’s existing

business and customer offering while avoiding the highest risks of medical regulation and
overseas expansion.

6. Mendelow Stakeholder Mapping — Sustainability Claims

Possible exam question

From: Agata Paluch, Chief Financial Officer

To: Senior Finance Manager
Subject: FWD: Sustainability reporting criticism

Hello,
A news report has criticised Kwirtmak for making broad sustainability claims without enough
detailed evidence. The Board is concerned about the possible reaction from customers,
regulators, employees and investors.

I need your advice on two matters:

● Firstly, evaluate how stakeholder mapping could help Kwirtmak manage the reaction
to the criticism.
[sub-task (a) = 50%]

● Secondly, recommend how Kwirtmak should communicate with key stakeholders.

[sub-task (b) = 50%]

Answer (a) — Stakeholder mapping

Stakeholder mapping helps Kwirtmak classify stakeholders based on their power and level of
interest. This is useful because different stakeholders require different communication
approaches.

Customers may have high power and high interest. They may rely on Kwirtmak’s
sustainability data for their own reporting. They should be treated as key players and given
detailed evidence about energy use, recyclability and waste reduction.

Regulators also have high power and high interest. If they believe Kwirtmak’s claims are
misleading, they may investigate or impose stricter requirements. Kwirtmak should engage
openly and provide evidence.

Employees may have lower power but high interest. They may feel concerned if the company
is accused of greenwashing. Kwirtmak should keep them informed so they can respond
confidently to customers.

Suppliers may have medium power and medium interest. Kwirtmak may need them to
provide sustainability data about materials and components.

The media and public may have variable power but can influence reputation. They should not
be ignored because negative stories can affect customers and investors.

Stakeholder mapping therefore helps Kwirtmak prioritise communication and avoid a one-
size-fits-all response.

Answer (b) — Communication recommendations

Kwirtmak should communicate transparently and avoid defensive statements. It should

acknowledge that sustainability reporting can be improved and commit to providing clearer
metrics.
For customers, Kwirtmak should provide detailed product-level information, such as energy
consumption, recyclable material percentages and environmental benefits compared with
traditional methods.

For regulators, Kwirtmak should cooperate and show that it is willing to improve reporting
standards.

For employees, internal communication should explain the facts and provide guidance on
how to answer customer [Link] suppliers, Kwirtmak should request reliable
sustainability data and include this in future reporting.

For investors, Kwirtmak should explain how improved sustainability reporting supports long-
term risk management and competitive advantage.

Conclusion: Kwirtmak should communicate honestly, provide evidence, and tailor messages
to each stakeholder group.

7. Change Management — New Medical Printer Division

Possible exam question

From: Agata Paluch, Chief Financial Officer

To: Senior Finance Manager
Subject: FWD: Medical printer division

Hello,

The Board is considering creating a new division to develop and sell 3D printers for medical
customers. This would require new staff, new compliance procedures and a different
customer support model.

I need your advice on two matters:

● Firstly, evaluate the change management challenges that Kwirtmak may face in
creating the new medical printer division.
[sub-task (a) = 50%]

● Secondly, recommend how Kotter’s change model could help manage the change.
[sub-task (b) = 50%]

Answer (a) — Change management challenges

Kwirtmak may face resistance from employees because the medical division will require new
skills and stricter compliance procedures. Staff who are used to industrial customers may find
medical regulation more demanding.
There may also be cultural challenges. Medical customers may expect higher levels of
documentation, safety assurance and response time. Kwirtmak’s existing processes may need
to change.

There may be resource conflict. Existing departments such as R&D, production and customer
service may worry that resources will be moved away from current printer lines.

There may also be uncertainty about roles. Employees may not know who is responsible for
medical compliance, product testing or customer training.

The change may also affect risk appetite. Medical printing has higher product liability risk, so
Kwirtmak may need a more cautious approach than in existing markets.

Answer (b) — Kotter’s model

Kotter’s model could help by providing a structured approach.

First, Kwirtmak should create urgency by explaining why the medical market is strategically
important and how it could support future growth.

Second, it should build a guiding coalition involving the CEO, CTO, Operations Director,
CFO, compliance specialists and senior managers.

Third, it should create a clear vision for the medical division, such as becoming a trusted
provider of safe and accurate medical 3D printing solutions.

Fourth, the vision should be communicated clearly to employees so they understand the
purpose of the change.

Fifth, barriers should be removed. This may include training, hiring regulatory experts and
updating quality systems.

Sixth, Kwirtmak should create short-term wins, such as successful pilot projects with selected
dental laboratories.

Seventh, it should build on these wins by expanding into more medical applications.

Finally, the change should be embedded in culture through procedures, performance

measures and compliance standards.

Conclusion: Kotter’s model can help Kwirtmak manage the medical division change in a
structured way and reduce employee resistance.