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I thought it went OK but now I’m second guessing everything. Sensitivity analysis and risk /return theory I think I wrote a lot for little marks. Also last question in section c about cost of equity and project specific cost of equity my percentages capm were 18% and 11% respectively. Anyone else? I’m convinced I have failed this.
Did anyone else get the sensitivity question where the contribution was $200 but no other pricing was provided for the NPV calculation. How did you answer the question?
CHERYLLOVATT wrote:I thought it went OK but now I’m second guessing everything. Sensitivity analysis and risk /return theory I think I wrote a lot for little marks. Also last question in section c about cost of equity and project specific cost of equity my percentages capm were 18% and 11% respectively. Anyone else? I’m convinced I have failed this.
Same here! Second guessing it all! I got the same percentages for CAPM although after the getting the second one, I did a weightage of the two, and got a new percentage, because I was scared its too little work for too much, I dont know if that was right. For the sensitivity analysis I messed up the calculation question, and I realized what I was supposed to do but ran out of time, dont remember how many marks it was for… I am just hoping to pass the exam
The NPV and Sensitivity was pretty tricky. I got 11.75% for the sales volume sensitivity. Idk if this is right though
I took my capm and multiplied them by the market value of equity for the cost of equity in $. I did a wacc also just for the sake of it as I got a bit confused but came back to it and fixed it. Sensitivity analysis is took the npv over the contribution and got 10.28 or something around that. Section b wasn’t great for me.
Can anyone remember the npv for the project in sections c question a?dve1 wrote:The NPV and Sensitivity was pretty tricky. I got 11.75% for the sales volume sensitivity. Idk if this is right though
do you remember how many marks the sensitivity part was for? Just the calculation?
CHERYLLOVATT wrote:I took my capm and multiplied them by the market value of equity for the cost of equity in $. I did a wacc also just for the sake of it as I got a bit confused but came back to it and fixed it. Sensitivity analysis is took the npv over the contribution and got 10.28 or something around that. Section b wasn’t great for me.
Can anyone remember the npv for the project in sections c question a?Did you discount and account for tax in your contribution?
dve1 wrote:The NPV and Sensitivity was pretty tricky. I got 11.75% for the sales volume sensitivity. Idk if this is right though
NPV was 8 and sensitivity was 4 with the written bit being 8 marks
CHERYLLOVATT wrote:No I did not. ? maybe I’ll get one mark for knowing the formula….haha
I think the subsidy was before tax not sales but who knows
everyone got 12% 11% and somehow I got 19%. I don’t really remember, we were given proxy equity beta right? So I ungeared and regeared again :-s
We talking about the sensitivity??
The government surplus for npv I put at the end of the cashflow as it was tax exemptContribution is sales – variable costs, so
SALES 0
VC 0
Contribution 200
Fx. (10)
Net cash flow 190
Tax
EtcTo find the sales volume sensitivity you need to discount sales – discount VC and account for tax. This is because sensitivity is NPV / Present Value of variables. Well that’s what it says in my notes anyway, I could be wrong
When working out the cost of equity – is CAPM alone the cost of equity?
Or is it CAPM * Market Value of the shares = Cost of equity?
I’m not sure about this and now I think I have got it wrong. I worked out the CAPM and thought I was fine as that is the cost of equity. Didn’t bother working out the market value of the shares.
michaelrhys89 wrote:When working out the cost of equity – is CAPM alone the cost of equity?
do you remember your CAPM?
michaelrhys89 wrote:When working out the cost of equity – is CAPM alone the cost of equity?
Think you needed to work out the market values of equity and debt to find the project specific cost of equity
Yeah I defo didn’t get any marks for what I have done then ha. Hopefully I have scraped some marks for theory
michaelrhys89 wrote:When working out the cost of equity – is CAPM alone the cost of equity?
Hi Dve1, I did the same, calculate the asset beta then geared back to have equity beta and them calculate CAPM. I remember the company is highly geared so equity beta is more than 2 and my CAPM is 19%
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