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ACCA P4 Revision lectures Download ACCA P4 exam
April 6, 2020 at 7:12 am
Hi Mr. Moffat,
The question says “Recently Bulud Co offered Chmura Co the option to sell the entire project to Bulud Co for $28 million at the start of year three. Chmura Co will make the decision of whether or not to sell the project at the end of year two.”
Why do not need to calculate the PV of $28 million when doing b(ii)?
Thank you very much. It’s a great lecture!!
John Moffat says
April 6, 2020 at 8:21 am
$28M is the exercise price. As I explain in my lectures on option pricing, in the formula what we multiply Pe by is there effectively to do the discounting.
November 14, 2019 at 10:56 am
one silly question, i am always confused regarding the value of option, is 3.20m we are suppose to pay to buy the put option? and is it the same reason why we add it to the negative NPV to find the net value of project?
amazing lecture, thanks a ton for taking such an effort for making things easy and manageable, its really helping me.
November 14, 2019 at 3:20 pm
It is not that we actually pay for the option, but it is how much extra the option makes the project worth to us.
(And thank you for your comment 🙂 )
September 1, 2019 at 6:01 pm
Very helpful! Just one silly question. If they didn’t give you the risk adjusted cost of capital and you had to work it out, would you then consider the inflation? I presume in this question we assume the 12% they tell us covers that?
March 7, 2019 at 8:00 am
Thank you for your comment 🙂
March 6, 2019 at 5:15 pm
Thank You So Much. Easily and professionally explained. Looking forward to passing
November 15, 2017 at 11:07 pm
great lecture…many thanks!
November 16, 2017 at 8:50 am
Thank you for the comment.
November 8, 2016 at 4:32 am
Hi Mr Moffet,
in b(ii) while calculating option pricing, how is the time to expiry is 2 years and not 3 years? is “t” not the years the project life is left? or is it life of project that has elapsed?
Thanks in advance.
November 8, 2016 at 7:39 am
The start of year 3 and the end of year 2, is 2 years from now 🙂
December 9, 2015 at 3:57 pm
Wow! thank you, lecture made the exam a walk in the park. I think on Friday i will show this exam the level of professionalism you use to tackle the questions. wow.
December 9, 2015 at 4:29 pm
Thank you for the comment, and good luck on Friday.
May 29, 2015 at 6:04 pm
You make it all so easy. However, I dont understand why we have to add back the capital allowances to the after tax cash flows.
May 29, 2015 at 5:58 pm
Thanks, you really made it easy to understand. I understand why we deduct capital allowances before we tax the cash flows but I am not quite clear on why we had to add it back to the post tax cash flows.
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