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  2. SIR LETS SAY WHILE CALCULATING EXPECTED VALUE –

    you showed the probability adn 25(does not grow as expected) 75% (grows as expected) and the split the 75% into 15% & 60%

    but lets say in the exam while calculating the expected value i had shown 25%(not as expected given) 20%(given) and the expected growth (100-25-20)= 55 and the stated it un assumptions would we get full marks

  3. SIR LETS SAY WHILE CALCULATING EXPECTED VALUE –

    you showed the probability adn 25(does not grow as expected) 75% (grows as expected) and the split the 75% into 15% & 60%

    doubt – but lets say in the exam while calculating the expected value i had shown 25%(not as expected given) 20%(given) and the expected growth (100-25-20)= 55 and the stated it un assumptions would we get full marks

    • Remember that you do not need to have finished the question to get the 50% that you are looking for to pass the exam. Also, now that the exam is computer based the spreadsheet speeds up some of the arithmetic (provided obviously you have practiced using the resources on the ACCA website) 馃檪

    • I don’t know why – I have just checked my addition and it is correct.

      (Even if had been wrong, remember two things – firstly, if you are taking the paper based exam then the marks are for the workings and a wrong totalling would lose at the most just 1/2 a mark. Secondly, if you are taking it as a computer based exam, then the total will be worked out on the spreadsheet and unless you used the wrong formula for adding on the spreadsheet the total would not attract any marks at all 馃檪 )

    • But it is part (c) of the original exam question that most of the lectures are working through!!! (Unless you are looking at the question in one of the Revision Kits and they have amended the parts of the questions).

  8. Thanks for the great lectures. The way you have gone through the question simplified the techniques to deal with it.
    But sir, the PV for year 3 if slow then slow down(40% of 25991.3) is 10396.52 and not 10364.5. Just an observation

  9. Thanks John for these lectures on this question. It is such a long question with a lot of techniques. I did correctly for most parts until this expected value section that really threw me off….even tried to calculate standard deviation myself…. Hope that I dont have to see such crazy question in real exam but thank you for your videos. Also I know that I have been asking you a lot of questions about the market value of debt and the cost of debt, the videos on this question really helped me understand that the correct way to calculate cost of debt to company while the examiner assumed an incorrect cost of debt…. Again, thanks for your great help to self learners like us, it was really helpful.

  11. Dear Sir,

    For part of question (Lumi Co, a leisure travel company, has offered $50 million to buy the project from Fugae Co at the start of the second
    year. Fugae Co is considering whether having this choice would add to the value of the project.)

    Why we did not use BSOP model?

      • Hi John – appreciate this comment is nearly two years old hopefully you still see this.

        When I tackled this question I got everything right (near enough anyway!) up until the option part where I used the BSOP model. As you say we weren’t provided the standard deviation but in my exam conditions answer I have made one up based on the probabilities.

        I have therefore concluded that the value of the “with” answer is the NPV of the without + the option price.

        Obviously I see I am wrong, but do you think I would have gotten any credit for that in the actual exam?

        Thanks for these videos they are really helpful!

      • You would get some marks, but obviously not full marks (provided as always that it is clear to the marker what you were trying to do, from your workings).

  13. Thanks a lot for the clinical dissection of this question. When I read the question, I got angry with the examiner. How many years did it take him to concoct this onerous question? And how on earth did he expect anybody to reason properly faced with this question under exam conditions?

    A financial manager may be given a week or two to advise the board on a labyrinthine question of this nature. I sympathise with all the candidates who sat for this paper and hope the same fate does not befall me in September 2016.

    This is the first revision question I looked at. But for the methodical way you dealt with it, I would have postponed sitting for this paper till December. Thank you very much.

    It was a one for all revision question for most of what I have learnt so far. It also taught me to open up my mind to all perspectives of P4 while attempting any question.

  16. Due to sit the Dec 15 exam in a couple of weeks for the first time and just looked at this question and nearly fell over with panic!! Then I’ve listened to your lecture. The methodical way you have gone through everything has really helped and I can understand that this was a particularly tough question. Hopefully, you taught me not to panic and to just work through it as much as you can getting as many marks as possible.

    Your help is invaluable. Thank you so much.

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