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ACCA P4 Revision lectures Download ACCA P4 exam
September 15, 2018 at 12:41 pm
hello!can someone use revision kit for june 2018 for december sitting exam
John Moffat says
September 15, 2018 at 5:25 pm
Yes – the syllabus has not changed (but please ask this sort of question in the Ask the Tutor Forum in future).
September 17, 2018 at 8:24 am
September 17, 2018 at 3:59 pm
You are welcome 🙂
August 13, 2018 at 5:54 pm
Hi John, can these questions still be used for revision of the new AFM format of the exam?
August 13, 2018 at 7:46 pm
Of course they can (otherwise they would not still be on the website!!) 🙂
All that has changed in the format is that there is now no choice of questions in Section B – just two 25 marks questions. Section A does not change at all.
August 25, 2018 at 10:39 am
sorry for the delayed reply, and thank you for confirming
August 25, 2018 at 10:45 am
June 28, 2018 at 5:18 pm
The way you explain the concepts makes a lasting impact and i have understood the concepts. Many thanks
June 29, 2018 at 7:42 am
Thank you for your comment 🙂
May 22, 2018 at 6:05 am
the avem company is ofering 1200 million is this cash consideration,, and if it is then isn,t the premium or cost to the avem company 1200m-922.5 m = 277.5
May 22, 2018 at 6:09 am
the additional value to the avem is therefore 451.5 -277.5= 174m
May 22, 2018 at 9:07 am
No, for two reasons.
Firstly Nahara want a premium of 30% of the value of Fugae when they sell it.
Secondly, the benefit to Avem of buying Fugae is the extra value created, less the premium going to Nahara.
April 30, 2018 at 12:43 pm
Dear John, thanks for excellent lectures. But could you pls clarify:
Valuing ‘Fugae’ you use FCF to Equity and discount on the cost of equity. You treat the result as company value if ‘Fugae’. But isn’t the result only Equity value of ‘Fugae’ and we have to add cost of debt(bonds) to come to the company value? Almost nobody asked this question, apparently the answer is obvious, but pls kindly explain. Thank you for your time!
April 30, 2018 at 5:21 pm
It is the shareholders who own and who are ‘the company’, so it is the value of the shares that is required.
April 30, 2018 at 6:06 pm
John, if so, the proposed purchase price of 1,200 mill from Avem is only for shares/equity value of Fugae (922.5 mill) or for shares/equity + debt: 922.5 + 380 = 1,302.5 mill?
May 1, 2018 at 5:28 am
That depends on whether or not they are taking over the debt.
May 1, 2018 at 10:28 am
Dear John, just to close this thread
The question states – “proposal to acquire Fugae Co for $1,200 million”. No specification if it is only equity or plus debt. Since the question of debt never appeared in part i) it apparently assumes the proposal was only for equity. How can we know what is the proposal for? And valuing the companies through shares price and cash flow to equity the answer (and you) use “value of company’ interchangeably with “equity value”, while we know the basics that ‘company value’ = ‘equity value’ + ‘debt’. Shall that be general approach to the p4 questions that if it does not say directly or indirectly about debt, it must be assumed the valuation question is about equity? I Thank you very much again for your time! I appreciate your help.
May 1, 2018 at 4:30 pm
To an extent, it is an assumption. Always in P4 (especially for question 1) you will need to make assumptions (which is why the questions always ask for your report to state your assumptions). Provided you state your assumptions you still get the marks, even if you make different assumptions (and therefore get a different answer) from the examiner. It also highlights the importance of making sure your workings are easy for the marker to follow.
Although the question does not specifically ask you to use ‘free cash flow to equity’, the fact that it is mentioned throughout does suggest that this is the approach to take.
Also, strictly, although the value of the business is the equity plus the long-term debt, the company is the shareholders and so strictly the value of the company is the value of the equity. However even exam questions do tend to use the words as though they mean the same.
May 1, 2018 at 8:04 pm
Thank you John, you couldn’t add more to better explaine
May 2, 2018 at 5:39 am
July 30, 2017 at 4:48 pm
Cracked my brain for hours on this question, heard your lecture, understood immediately
May 23, 2016 at 2:49 pm
Why is the bond information given? In a question like this to calculate the value aren’t we suppose to calculate the Free cash flow to firm in which case to add the value of debt back?
May 23, 2016 at 5:51 pm
Why on earth would you want to add back the value of debt to the value of the firm as a whole? That would make no sense at all.
I really cannot add more to what I say in the lecture 🙁
February 27, 2016 at 5:15 pm
Thanks so much for your explanations.
Would you be able to clarify for me the use of dividend valuation model. I follow calculating rb growth, but we the apply the dividend valuation model to free cash flows and not to dividends. Would the valuation of shares using dividend growth not also give us the value of equity?
My assumption here is that if we were given cost of equity we would use that rate and dividends to value equity, but because we are given WACC instead, we must use free cash flows instead. Is that correct?
February 27, 2016 at 8:53 pm
Yes, but here we do not know what the dividend growth rate would be 🙂
February 28, 2016 at 9:54 am
Even replying over the weekend! I can’t recommend you and opentuition enough!! 🙂
February 28, 2016 at 10:33 am
December 6, 2016 at 1:11 pm
Hi John, I still do not understand why for the valuation we take the free C/Fs and not dividends. If we used the formula, then instead of using the full 76.5 Mio we should have used 22.7%x75.5 Mio, as this was the portion actually paid out as dividend. I don’t see how the explanation over the WACC fits in here, as it is my take that we are talking about different valuation models all together. We have not been given the WACC (unless I misunderstood). Thanks!
December 6, 2016 at 3:25 pm
But we don’t know what the future dividend policy will be, and ultimately all the free cash flows to equity will end up going to the shareholders. As per M&M, in theory the dividend policy itself is irrelevant.
I am not sure which part of the question you are referring to when you ask about the WACC.
December 8, 2016 at 6:26 pm
Thanks John. It was mentioned above in the thread (not by a tutor), but I believe it was not relevant eitherway.
December 8, 2015 at 1:00 pm
Thank you! wish we could think logically as you do when answering. But i appreciate the tip on labeling my appendix workings. I have always assumed the marker will fumble through.
December 8, 2015 at 2:53 pm
The marker certainly won’t just fumble through (and you would lose the professional marks).
August 13, 2015 at 3:45 pm
You make it look so easy – Great helpful lecture on a very detailed question
Why, when discussing the 30% premium for Nahara on the 922.5m current MV we are not making reference to 1200m offer price . this figure is pretty close to Current MV 922 & 30% thanks
August 13, 2015 at 4:09 pm
Thanks (although I appreciate that it is obviously easier for me when I am not actually under the pressure of the exam itself) 🙂
It would certainly be valid to mention the offer price in the discussion, however it is not relevant for the calculations because the value is being based on the future expected earnings (and the question was asking to report on the additional value).
May 24, 2015 at 3:18 pm
May 23, 2015 at 3:19 pm
WOW Lecturer step by step explanation, THANK YOU
May 19, 2015 at 2:31 pm
help on why par 8 was not taken in account which was about estimation for cost of debt and bond price for Fugae company..when determining market value of Fugae company.
May 19, 2015 at 4:00 pm
The information is taken into account when calculating the beta for the project that Fugae is considering (because we need the market value of the debt, and we calculate it using the the coupon rate etc.)
It is not relevant for part (c)(i) of the question because we are calculating the value of the equity based on the free cash flow to equity.
May 13, 2015 at 1:35 pm
Such a great Lecturer…the way you explain is very nice Mr.Moffat
April 9, 2015 at 2:11 pm
Really good videos Mr Moffat. Thanks a lot for taking the time out to work throught the question as promised.
April 9, 2015 at 2:09 pm
Very good vidoes Mr. Moffat. Thanks a lot for taking the time out to do the as promised. Really apreciated.
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