Forums › ACCA Forums › ACCA AFM Advanced Financial Management Forums › *** September 2024 ACCA AFM exam – Instant Poll and comments ***
- This topic has 17 replies, 10 voices, and was last updated 2 months ago by fhanif.
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- September 6, 2024 at 7:26 am #710876September 6, 2024 at 5:05 pm #710906
Did anyone get Sanna Co, 50 mark hedging question? There was money market but had to look at swap rates? I think I messed up as noticed in the last 5mins I converted my options incorrectly and when I went to divide by the strike to get the outcome, even after adding premium my option outcome resulted in lower payment compared to all the others…didn’t sound right!!
September 6, 2024 at 5:45 pm #7109091st queation 50 marks : Future and forward calculations, discussion about dividend, basis risk etc etc (I got lost in this question.)
2nd queation NPV : It was ok but had technical issues which delayed the exam.
3rd question: Acqusition with 3 methods. Cash offer, share for share and mix offer (cash + share). I somehow did it suggested to go for share for share
In my 1st attwmpt i got 47 but that time the exam was so much easier. This time I don’t think I will get near 40 marks!! ?
September 6, 2024 at 6:12 pm #710910Got the same paper as you!
Think on the 50 marker there was also 6 marks for centralised treasury too. Dividend calculation and I think something on funding the dividend?I also chose the paper for paper option but that’s because I ran out of time to look at the combined offer.
In section b there was like 7 marks on a capital rationing directors comments
Do you remember what the other 7 marker was on section b? Othet than the npv and business val
September 6, 2024 at 10:23 pm #710918I had same questions albeit my Q2 was the bus valuation with 3 diff purchase considerations and Q3 was NPV calc with using CAPM to find Ke to then find WACC and then NPV – can’t remember exactly the comments on this one – I think it was around 13 marks for the NPV calc and stating assumptions and then last part was commenting on Director A and B comments on capital rationing and 5 professional marks available.
Q2 was acquisition of co with 3 purchase considerations – cash, share for share and mix of cash and diff share for share with recommendations / board consideration with data given on co gearing levels versus the industry average.
Q1 started with what factors should the co consider in setting up central treasury department for first time, board report then for other parts which included an atypical FX hedge for receipt US co receiving cash from generic/made up country as the time had already passed and you were to comment on whether or not the management accountants assertions that the forward rate was better than the currency futures and was due to basis risk, then work out the dividend capacity of a co which has remitted divs from a subs and also comment on the dividend policy of that co with reference to board comments.
Overall fair to hard end paper and very challenging time wise – very disappointing absolutely no interest rate risk and only FX risk question was complete curveball as had never seen one that was retrospective and laid out like it was. Probably slightly harder than majority of other papers I have seen without being the very hardest.
September 6, 2024 at 11:01 pm #710920I had this paper kindly confirm whether my answers were correct or not, even though i left 30 marks dividend capacity question in the Q1 As u had not studied it.
Q1. A) 6 marks factors to decide centralisee treasury function-
Ans i gave, loss of autonomy leading to less motivation in regional offices, efficiency overall due to cost reduction, centralised control so that funds can be diverted to regions which need it the most and hedging congruence with centralised treasury function leading to cost reduction.B) I left 30 marks dividend capacity question but did the frwd contract n future contract, but was not sure of initial margin so left that too. Chose frwd contract as it was giving $93.35m whereas futures was giving $92.75m
September 6, 2024 at 11:06 pm #710921Q2) a) 13 marks NPV where my npc was positive with 13.1m and suggested doing sensitivity analysis as slight change in the assumptions might make the project negative. Also gave 3-4 assumptions that were being used in the question.
B) 7 marks question on issues of director A and DIRECTOR B- with suggesting that to director A to use rights issue to avoid using debt so that gearing ratio does not rise significantly
And suggested director b to motivate the management with introduction of rewards related to performance of the project and also give training to management with recruiting new hires for shortage of time resourceSeptember 6, 2024 at 11:17 pm #710922Q3) 13 marks question of mergers gain% calculation of raver co and erena co under cash offer, share to share offer and mixed offer.
My answer under cash offer erena co which was a target co was getting 3.2*50m shares=160m which was only 12.28% of the marker value of erena co and it was not approved by the CEO as erena co sHAREholders wanted 25% Premium on MV.
Share to share offer- 2/5*50m shares=20m shares of 30m shares raver co (acquirer co) amounted to 141.2m with MV 7.06 per share which is not in line with either raver co shareholders due to target co having 66.67% holding which raver co does not want as it wants to hold the majority shareholding and erena co getting loss of 0.9% at 141.2m with MV of 142.5m
Mixed offer- cash was 81m and shares given were 86m totaling to erena co getting 16% premium and 66.67%holding to raver co with only 10m shates issued to erena co.
So mixed offer was appropriate
B) rights issue- i suggested the directors of raver co to use overdraft facility to fund the 7m rights issue so as to avoid the increased gearing ratio as co is already standing at 31% gearing, if it takes mezanine debt the gearing will reach 43% which is closer to 44% of industry average and might lead to break 50% bank covenant for NCL.
September 7, 2024 at 7:32 am #710928Hi Any Lecturers……
Please advise since most of the students have felt this time AFM paper was terribly difficult will ACCA markers will be lenient in providing marks ?
September 7, 2024 at 8:28 am #710930Would also love to know the answer to this!!
September 7, 2024 at 7:36 pm #710945Got same paper would you please discuss further
September 7, 2024 at 7:38 pm #710946Can anyone discuss about sannas question 50 marks one?
September 7, 2024 at 8:32 pm #710948Sanna question was
A) advs and disadv on futures vs forwards
B) hedging the payment using money markets, but were given swaps to identify the rates, futures and options. I messed up with options and noticed when there was 5mins left, went to correct but made it worse, report didn’t match my calcs…
C) Comment on results (can’t remember nunber of marks)
D) agency issues of local treasury and head office and how to mitigate. Thought this was a odd one so I kept it more generic so doubt i’ll score muchSeptember 7, 2024 at 10:57 pm #710950Hey but I also noticed my payment was lowest with options what mistake we made here?? Also do u remember your swaps total borrowing costs? And what about the rest of exam mate?
September 8, 2024 at 7:11 am #710954With options you didn’t need to convert the outcome at the end, just needed to do contract size x no of contracts and then add premium…oh well.
I remember with swaps maybe I got a good rate for borrowing, but then deposit rate wasn’t beneficial so I said not to enter into a swap for deposit (or vice versa can’t remember). But I had never done a question like that before so mot even sure if you’re allowed to swap for one and not the other…
My second question was on calculating value of equity using dividend model and FCF, no PBIT was given with FCF and when I calculated it, it was much lower then dividend model…surely they should have been similair??
I couldn’t answer IPO and reverse takeover as didn’t learn :(.
Third question was a simple NPV but then there was something about capital investment system…can’t really remember know but something I hadn’t come across before.
This was my last exam, would have been nice to think I did enough for a pass rather then feeling crap
September 8, 2024 at 7:53 am #710960I feel more depressed now knowing I approached the swaps wrong, and got the money market calc wrong…time to prep for a resit
September 8, 2024 at 4:44 pm #710986I think I got the same exam as you…
Question 1 Risk Management: Sannas Co was OK overall, it was just the mix of interest rate swaps and MMH that was hard for me. In the hedging, i got lowest payment with futures.Question 2 was Mergers and Acquisitions: Zulla Co and it had IPO and reverse takeover and they told us to find gain with the dividend valuation method as well as free cashflow from equity. It seemed really tricky.
Question 3 was NPV: Kogkhan Co: and they had given an option. They asked us to calculate NPV before the option and after the option. Then there was a discussion question about the capital investment management system which i wasn’t too sure about but the calculations were simple enough.
September 8, 2024 at 6:38 pm #710989In your qu3 did you get a negative NPV? I wasn’t sure on PE to put in bsop but used the investment cost of 1250…
I thought the written bits were tricky, like agency issues between head office and regional treasury office. Even the capital investment.
What did you put for the underlying value of real options for the project? I started saying about option to withdraw or abondon but wasn’t sure…
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