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Valuation of a business (for acquisition) – suggesting a range of values
(part including present value of cash flows requiring calculation of the discount rate to use with CAPM involved)
Foreign exchange risk management (forward rates/money markets/futures/options)
Written question on the European debt crisis
Portfolio theory including written on international diversification
best of luck with exam!
• International investment appraisal techniques focusing on risk management tools.
• Impact on WACC following hedging of interest rate risk.
• Company valuation based scenario, possible MBO finance to structure.
• Adjusted present value with link to real options and Black Scholes option pricing model.
Cost of capital
Interest rate hedging techniques (swaps and FRAs – see examiner’s recent article)
The Eurozone debt crisis (see recent Student Accountant article)
examinable topics by kaplan
EXAM TIPS BY BPP
Ethical issues continue to appear regularly as an optional discussion question,
normally with practical financial issues from elsewhere in the syllabus. Economic
value added and ratio analysis can also be used to appraise the performance of
Cost of capital calculations are regularly tested, make sure that you are
comfortable adjusting betas for differences in gearing. Real options are also a
very popular theme.
This exam normally contains a question involving valuations which the examiner
sees as a crucial part of the syllabus; valuations questions are also likely to cover
strategic and financing issues. This area was not tested in December 2011 and is
therefore more likely than usual in June 2012.
We would expect to see a numerical risk management question featuring either
interest rate or exchange rate hedging; interest rate hedging was tested in
For emerging issues – the European debt crisis is very topical.
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