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Glad others felt the same regarding questions 3. I thought the discussion for Q3 was okay for – if they would make a good acquisition fit and defence strategy. Think that was worth 10 marks.
For the treasury department question I took a different approach. Economic risk relates to FX and interest rate movements so hedging strategies are managing economic risk. Spoke about well diversified investors in perfect markets don’t require unsystematic risk to be managed but then caveated to say how markets were not perfect and hedging avoids situations of financial distress and certainty for planning.
Question 1 – Foreign investment
Felt the 20 mark NPV part was a fairly standard question however I felt like I may have made some silly mistakes. Tax credit I just kept in the same year rather than offsetting against a future profit. I also didn’t read anything about the component being made by a parent, if this was true probably lost a couple of marks there. Not too hung up on this however as my understanding is one misstep does not effect your chance to get the following marks. Can’t remember exactly but my NPV was negative just by around 1M and APV was positive by around 1.5M.
APV was just the tax shield and interest subsidy, added to the NPV.
Assumptions on the above, a lot of different inflation rates their impact on costs and prices plus being used to calculate the future FX used to translate profits back to parent. Also the cost to decontaminate the land. May have missed out on one or two easy marks here as was very strict with time spent on questions so moved on.
Joint venture and subsidiary question was tough purely as I hadn’t seen anything on this, easy marks for those who had I would have though.
Ethics question I spoke about being a good cooperate citizen with regards to the land pollution, there was demand cooing devices from local businesses so meeting this demand is providing a useful service. Tried to beef this out with talking about how they should invest in the local area rather than transfer all profits back to the US.
Question 2 – Hedging
Very straight forward hedging question futures and forward rate being the same was odd but reassuring to see others got this. Feel like this was the easiest question to pick up marks if you had covered the topic.
OTC vs Traded options and Treasury role in risk management was worth ten marks and is a regular in most past papers.
Question 3 – Acquisition (Professional education company)
Found this question odd calculations wise. Hardly any figures given and seemed almost too simple when I was valuing the companies feel like I may have dropped some marks here.
That said there was a lot of easy discussion marks up for grabs here.
Advice to any future exam sitters, do not ignore the discussion parts of this exam. Worth half the marks and a lot harder to make stupid mistakes on these questions. If I was doing the NPV question at home without exam stress I would have probably done better, very easy to make stupid mistakes with a long winded calculation under exam stress.
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Hedging question – Yes that was my understanding. The following may not be a hundred percent accurate as all from memory but hopefully is helpful.
The question listed two future prices, July and September. The difference was 0.0012 and one months basis was 0.0004. Deducting this from the September rate gave the same rate as the Forward rate. This threw me slightly as I had never seen this happen before so I did the basis calculation using spot rate just to check my workings were not wrong and it gave a rate off by 0.0001. This way also gets credit if you look at past papers however I stuck with the same rate above. My guess is they want to you to discuss in the discussion element of the question why you would pick either one if they gave the same rate based on the companies preference which is common in past papers when the forward and future receipt is marginally different.
Options I can’t remember exactly and the calculation is always much more fiddly so easy to make a mistake. Think I got around 86,000 MRH. The premium was in cents per MRH so you had to multiply the premium by contract and contract size then convert at the Spot rate as premiums are paid upfront and deduct this from your exercise price.
Share for share question – Which acquisition question did you have the one about a professional educational company looking to acquire two companies?
2a
Wasn’t too sure but just made a logical guess from what was in the exhibit.
Government policy looked like an obvious driver for change. Speed up by lobbying if that didn’t work aggressive marketing to appeal to non green customers.
Wasn’t sure about the other so I said infrastructure (charge points as example).
To speed up could try integrate by creating innovative charging points and either secure government funding or sell the electricity to fund project.
2b
Disruptive tech just listed some benefits of the battery and what they meant for design team like scope of the battery meant they had the opportunity to create new appliances using the battery.2a
Wasn’t too sure but just made a logical guess from what was in the exhibit.
Government policy looked like an obvious driver for change. Speed up by lobbying if that didn’t work aggressive marketing to appeal to non green customers.
Wasn’t sure about the other so I said infrastructure (charge points as example).
To speed up could try integrate by creating innovative charging points and either secure government funding or sell the electricity to fund project.Disruptive tech just listed some benefits of the battery and what they meant for design team like scope of the battery meant they had the opportunity to create new appliances using the battery.
Comparing the two countries I structured the report using the four parts of porters diamond. Picked out the information from pestel to fit in to the components of posters diamond.
Question 4 was weird talking about those things in an email to other colleagues. Just went through the interview and other exhibits and pulled out leadership and cultural quotes and made recommendations on things we would do in the project to reiterate this behaviour and achieve success. Probably wasn’t what they wanted but might score some marks.
1A
BCG matrix assessment of 3 products however I thought there was other relevant points when it came to making recommendation such as:
JJ tech need a new star to subsidise electric car project as cordless will move down to cash cow and corded discontinued.
Where they were in their product life cycle.
The robotic side – maybe they didn’t have leading market share because their mapping etc wasn’t as well developed as their battery so investment was needed in these areas.
Also the company strategy for vacuums was differentiation which is high prices however market was getting new entrants driving down prices. Will it generate enough margin for subsidising if prices keep getting driven down.1b)
Was stumped at first but In the end just thought it made sense to go through each value chain component and talk about how it would need to be adjusted for cars. For example inbound logistics – is 300 suppliers realistic when you’re building cars upon them being ordered rather than in bulk, inventory was already a delicate balance. Then would say how this may affect their competence like quality production or drive up price of electric car.2a
Wasn’t too sure but just made a logical guess from what was in the exhibit.
Government policy looked like an obvious driver for change. Speed up by lobbying if that didn’t work aggressive marketing to appeal to non green customers.
Wasn’t sure about the other so I said infrastructure (charge points as example).
To speed up could try integrate by creating innovative charging points and either secure government funding or sell the electricity to fund project.Disruptive tech just listed some benefits of the battery and what they meant for design team like scope of the battery meant they had the opportunity to create new appliances using the battery.
Comparing the two countries I structured the report using the four parts of porters diamond. Picked out the information from pestel to fit in to the components of posters diamond.
Question 4 was weird talking about those things in an email to other colleagues. Just went through the interview and other exhibits and pulled out leadership and cultural quotes and made recommendations on things we would do in the project to reiterate this behaviour and achieve success. Probably wasn’t what they wanted but might score some marks.
1A
BCG matrix assessment of the 3 products however I thought there was other relevant points when it came to making recommendation such as:
JJ tech need a new star to subsidise electric car project as cordless will move down to cash cow and corded discontinued.
Where they were in their product life cycles.
The robotic side – maybe they didn’t have leading market share because their mapping etc wasn’t as well developed as their battery so investment was needed in these areas.
Also the company strategy for vacuums was differentiation charging high prices however market was getting new entrants driving down prices. Will it generate enough margin for subsidising projects if prices keep getting driven down.1b
Was stumped at first but In the end just thought it made sense to go through each value chain component and talk about how it would need to be adjusted for cars. For example inbound logistics – is 300 suppliers realistic when you’re building customised cars upon them being ordered rather than in bulk, inventory was already a delicate balance. Then would say how this may affect their competence like quality production or drive up price of electric car.2a
Wasn’t too sure but just made a logical guess from what was in the exhibit.
Government policy looked like an obvious driver for change. Speed up by lobbying if that didn’t work aggressive marketing to appeal to non green customers.
Wasn’t sure about the other so I said infrastructure (charge points as example).
To speed up could try integrate by creating innovative charging points and either secure government funding or bills them though own funds and sell the electricity to fund project.2b
Disruptive tech just listed some benefits of the battery and what they meant for design team like scope of the battery meant they had the opportunity to create new appliances using the battery.3
Comparing the two countries I structured the report using the four parts of porters diamond. Picked out the information from pestel to fit in to the components of posters diamond. Took an objective approach and didn’t make recommendation as it asked you not to.Question 4 was weird talking about those things in an email to other colleagues. Just went through the interview and other exhibits and pulled out leadership and cultural quotes. Then made recommendations on things we would do in the project to reiterate this behaviour and achieve success. Probably wasn’t what they wanted but might score some marks.
1A
BCG matrix assessment of 3 products however I thought there was other relevant points when it came to making recommendation such as:
JJ tech need a new star to subsidise electric car project as cordless will move down to cash cow and corded discontinued.
Where they were in their product life cycle.
The robotic side – maybe they didn’t have leading market share because their mapping etc wasn’t as well developed as their battery so investment was needed in these areas.
Also the company strategy for vacuums was differentiation which is high prices however market was getting new entrants driving down prices. Will it generate enough margin for subsidising if prices keep getting driven down.1b)
Was stumped at first but In the end just thought it made sense to go through each value chain component and talk about how it would need to be adjusted for cars. For example inbound logistics – is 300 suppliers realistic when you’re building cars upon them being ordered rather than in bulk, inventory was already a delicate balance. Then would say how this may affect their competence like quality production or drive up price of electric car.2a
Wasn’t too sure but just made a logical guess from what was in the exhibit.
Government policy looked like an obvious driver for change. Speed up by lobbying if that didn’t work aggressive marketing to appeal to non green customers.
Wasn’t sure about the other so I said infrastructure (charge points as example).
To speed up could try integrate by creating innovative charging points and either secure government funding or sell the electricity to fund project.
2bDisruptive tech just listed some benefits of the battery and what they meant for design team like scope of the battery meant they had the opportunity to create new appliances using the battery.
3
Comparing the two countries I structured the report using the four parts of porters diamond. Picked out the information from pestel to fit in to the components of posters diamond.Question 4 was weird talking about those things in an email to other colleagues. Just went through the interview and other exhibits and pulled out leadership and cultural quotes and made recommendations on things we would do in the project to reiterate this behaviour and achieve success. Probably wasn’t what they wanted but might score some marks.
