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Hey John,
This is my second time sitting for p4. Last time i failed due to drastic time management losing all my time on calculations which i knew but was very time consuming.1) When calculating the NPV lets say this i have calculated operating flows as 12436 and cost as (6345). If i write operating profit as 6000 and calculate tax on this operating profit at the given rate will i get the mark for tax calculations ?
2) Is there mark for simply adding the numbers(Sum of all flows * d.f gives PV – do you get mark for just summing all number and if you have calculated the sum wrong do you still get marks for PV ?
Any Tips for saving time is much much appreciated.
Regards
Sid 🙂1. Yes, of course (but you should also be calculating the tax saved on the capital allowances).
2. I doubt there will be a mark for just adding up the PV’s. However, the marks overall are for the workings rather than for the final answer, which is why it is so important to show your workings in a way that the marker can follow. If you are approaching it the correct way you will get most of the marks even if the final answer is wrong.
Time pressure is a problem for everyone. To pass, you must make sure you attempt every part of every question. You will get more marks by handing in every part of 3 questions all part finished, then leaving out one question completely.
For calculations, if you are taking too long then stop – you are after half marks. Never write nothing for a written part – almost anything sensible will get a mark, (and even just 1 mark is enormous if it make the difference between 49% and 50%).Watch my lectures working through several recent Question 1’s, because I talk about the approach as well as the technical content.
Thank you john.
I have already gone through your lectures will go through them again…
Hi John,
I hope you are well.
I have the Texas BA11 Plus calculator and it is very quick and easy to perform alot of the calculation such as cashflows, NPV, IRR, bonds etc on this calculator.
My question is since the paper is so time driven is it that important to manual perform and write out the calculation rather than just do them on the calculator?
Hi John,
I hope you are well.
Chapter 8 example 4.
A company has 8% bond in issue, redeemable in 5 years time at a premium of 10%. The current market value is 98.63.
My question is when calculating IRR why is the coupon of 8 not included in the redemption. Meaning for IRR to be 10% at year five we would have to receive 110 not 118? I feel this should be 118?
The marks in the exam are for the workings and not for the final answer.
You must show enough workings (and neatly) for the marker to be able to see that you know what you are doing. If the workings are not there then you will not get the marks.
The receipt at time 5 is 118 in the answer. Since in example 1 the flows discounted at 10% to a market value of 96.63, the IRR has to be 10%. I am not quite sure what your problem is because the answer is certainly correct.
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