Forums › ACCA Forums › ACCA AFM Advanced Financial Management Forums › *** P4 December 2013 Exam was.. Post your comments ***
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- December 3, 2013 at 11:44 am #149461December 3, 2013 at 3:06 pm #149733
Guys… anybody wants to discuss the answers..?
December 3, 2013 at 3:18 pm #149741AnonymousInactive- Topics: 0
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time management 🙁
December 3, 2013 at 4:30 pm #149769I do not remeber cost of equity but my WACC was 9%
December 3, 2013 at 5:01 pm #149778thefutures price and the spot price had a large basis difference… that put me off a lil bit…
December 3, 2013 at 5:01 pm #149731AnonymousInactive- Topics: 0
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Had it possible to complete first question?
December 3, 2013 at 5:01 pm #149772My weighted asset beta was about 1 (0.99), Geared Beta was 1.45. Cost of equity was about over 10.7% (please dont quote me, i think it was that, i cant remember now but i think so)
WACC was then about 9% because we are told FCF to Firm not FCF to Equity (FCFE) so discount factor should be WACC.
This is just what i think it should be. Even if you didn’t get the WACC, I am told we will still get marks for our thought process.
I hope/pray we make it . Good-luck to us all.
Thanks
December 3, 2013 at 5:01 pm #149786AnonymousInactive- Topics: 0
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How did you guys go about part b & c for q3?
b) Implication for Share holders of parent company (M Co) for 50% premium as compared to 30%
c) Otherwise additional cash that was required and how could the parent company arrange it?Btw Weighted average was on MK of shares right, I think we can work it out again:
Shares of M (Parent Company) 210 Million, Price/Share= 5.8
Shares of S (Target Company) 200 million, Prince/share= 2.4
Be was same = 1.2
M’s Ba was 0.9 & S’s Ba was 1.2.Risk Free Rate was 4% & Market Risk Premium was 9%.
Now, since we are given the PREMIUM we wont deduct RFR right? 4+ 9*Be for Ke
Kd was 4.55%I think we can work out WACC…
December 3, 2013 at 5:02 pm #149770Yes Time management was as ever a problem. I answered q2 and q3 first and then I was only left with 1 hour and 15 minutes for question 1. This paper was fair though and better then the June paper. Hopefully this time I have passed, feeling confident. I believe I got 9% for the WACC on Q3 also. The cost of equity may have been 10.4% but as it was a cashflow to firm you then had to WACC it once you did this then you came to 9%.
December 3, 2013 at 5:02 pm #149756The first question was too long, too many variables to compute and the time was too short. Spent too much time trying to attempt question 1. Question 2 , i got it mixed up. I know we had to both strike prices of 94.50 and 95.00 ( so means 2 calculations), but with interest rate going to be up or down by 0.09% against the bank offer rate,made me to think does that mean 4 different answers? I did 4 answers as i could. Question 3, got a WACC of 9% (hope it is correct).
Honestly, the paper was too long for 3 hours. U needed an extra hour. But I hope I make it.
December 3, 2013 at 5:04 pm #149766Hi, lakeside!
How do you arrive at 9% in q3?
I ve calculated weighted average asset beta of 1. Then regear to equity beta of 1.6 (if I am not mistaken). Cost of equity then appeared to be 10,4%. Anyone?)December 3, 2013 at 5:04 pm #149751Yeah.. Agree the first question was sooooo long took me 2 hours to.
December 3, 2013 at 5:05 pm #149750AnonymousInactive- Topics: 0
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The first question was about foreign investment and real option.(It took 2 hours 🙁 )
The second was about hedging FRA, futures and futures. Delta hedging.
The third was about acquiring company. Acquisition 3.
December 3, 2013 at 5:06 pm #149749AnonymousInactive- Topics: 0
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I thought it was a fair enough paper…I agree, it was just the time management I got stuck on. Took too long on question 1, ok for q 2 and then rushed through question 3.
December 3, 2013 at 5:07 pm #149760AnonymousInactive- Topics: 0
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Hope I could get 10marks for Q3…
December 3, 2013 at 5:07 pm #149734I tought that the second question had some snag somewhere?? (or did i miss something?)
December 3, 2013 at 5:08 pm #149810AnonymousInactive- Topics: 0
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i got 10.4 wacc in question 3 also
December 3, 2013 at 5:11 pm #149815AnonymousInactive- Topics: 0
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for the 1st question – what was your answer for the business risk ? also was there put or call option? what was your Pa = is it NPV of the project at year 2?
December 3, 2013 at 5:11 pm #149816AnonymousInactive- Topics: 0
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first question was easy wat u think guyz ? if u do the article there were not many adjustment there apart for inflation and we have to adjust the rate spot rate through the formula?
December 3, 2013 at 5:12 pm #149817AnonymousInactive- Topics: 0
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what were the benefits and drawbacks for WTO in 1st question?
December 3, 2013 at 5:13 pm #149819AnonymousInactive- Topics: 0
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it was put option as we were selling the investment pe was offer 28 m and pa was pv of clasflows and rest is given risk free we take as rate on debt and 0.35 votality is given year 2
December 3, 2013 at 5:14 pm #149822AnonymousInactive- Topics: 0
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yes i wanted to question 1 and 3 pleae tell question 2 i made a mess because of time mangement
December 3, 2013 at 5:15 pm #149824A very fair paper!! Much better than past exams questions that I have seen. The pass rate for this paper should be the best I guess. Yes it was time pressured, but I guess with rigorous question practice that shouldn’t be a problem. Time and again ACCA and training providers have reiterated the need to practice questions in exam time. I wasn’t that well prepared though and don’t think will clear but am happy about the fairness of the exam.
December 3, 2013 at 5:15 pm #149825Oh well. Not feeling very positive about P4.
Forgot to add the nrv of land & buildings on the cash flow, but added it back in at the end.
I wasn’t sure if I should include a 5% rebate for the tax agreement in $. Left it out and stated assumption that no other overseas revenue to net off against.
Think npv ended up over $30m (with adj for l&b).
Also think I messed up the exch rates as used 72 as year 1 in PPP calc then decided that I needed a year 0 in npv so used 72 for year 0 and year 1. Stated that I considered purchase of machinery to occur at the end of the year and didn’t have indication of when NOW is and when production would begin.
Black Scholes – must’ve done something wrong as I came up with a negative answer!
Explained that it would be a poor decision to make as npv of project up to the 2 years concerned was not enough to justify sale.
Took 2 hours also!!
Q2 was a toughie after all that and my head was so messed up I couldn’t think straight.
Couldn’t even really think of the delta answer.
So I worked out what I could – contract no etc guessed at closing futures price and gave 2 outcomes based on up/down base rate!!
Q3 was a mind screw again. Combined co valuation came out lower than the 2 market values added together!
Got 0.9 for weighted beta, then 1.5 for geared beta then 21% Ke. Wacc came out at 14.? So used 14%
Wrote down that shareholders won’t be happy with higher premium as it devalues their shareholding.
If I pass this I will track down the examiner and kiss him !!!December 3, 2013 at 5:17 pm #149827AnonymousInactive- Topics: 0
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2nd question if it was related to borrowing than he gave than question will becom very easy than i would pass iwth good parks somehow now hangin between 55 to 50
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