[abz12]

Hi Sir. The question is from an ACORN workbook and the answer is $2.8m but there is no working. This is why I posted the question on the forum for some help.

From what you have helped me with I can see that the PV of the returns before the issues is -$14m+pv=$2.3m. Therefore PV should be $16.3m

I can see if I deduct 16.3m from the new PV of $13.5 I get $2.8m but I am not clear on why I needed to take the difference in PV. Why dont we add this difference to the original NPV?

thanks

[abz12]

ahh I misread the question and did not see that it said premium. so no need to take the difference between Rf and Rm.. which is what I was meant to show as 8%-5%.. no need to deduct since 8% is the premium!

I will rework.

Thanks Sir

[abz12]

hhmm no I copied the question as is! Its an old Kaplan book I am using. might be an error….

Some of the questions I post are examples in the book and I pull out bits I do not understand/ the theory and ask them as a questions.

thanks sir.

[abz12]

great. I follow now. I would not of done this in the exam.. but practice makes perfect.

[abz12]

ok. I follow thanks

[abz12]

Sir. The questions takes it a step further once it has calculated the compound return.

Answer ” The VC is making $180 equity investment. To generate a return of 25% a year on a compound basis this investment will need to grow to 439.5 (180*1.25^4) at the end of 4 years.

The VC investment represents 80% of the equity, therefore the total equity value will need to be 549.3 (439.5/80%)

The solution says that the answer is 549.3. I do not understand why we divided the compound growth of 439.5 by 80%. What in the question gives the clue that this is what we have to do?

The question is- Calculate the minimum total equity value of QQ required in order to satisfy the VC expected returns.

[abz12]

thanks for the explanation sir. Looks like there is an error in the book. No worries I get the gist. Thanks

[abz12]

well the answer said customer for both quality and marketshare which is what I did not understand.

I agree marketshare is finance.. but why would quality be customer? Perhaps a typo I think..

Thanks anyway sir.

[abz12]

thanks Sir. I had a total mind freeze and completely missed that average cost of capital is WACC. I will check out the lectures for a refresh it has been a while.

Thanks

[abz12]

thanks for the explanation. But what type of finance decision would cause the average cost of capital to decrease?

[abz12]

Hi- my email is abi.s61@yahoo.com. if you want to share ideas about the case.

[abz12]

Thanks Cath

[abz12]

yes- makes sense thanks Cath

[abz12]

Hey I am also planning on taking Feb 17 case. Do you want to create a study buddy group?

@ktbrett33 said:
Hi,

I have a similar question..The lecture notes and videos are merely for OT exams?
Will this not also apply to learning for the case study in terms of technique etc?

Im also taking the case study in Feb 2017.. will material come out soon?

Thanks!

[abz12]

@aethist76 said:
Thanks for the heads up – I’m planning to take up the case study in feb 2017 – any chance the case study guides would be available by then.

Hey I am also planning on taking Feb 17 case. Do you want to create a study buddy group?

[abz12]

very detailed. thanks as always Cath

[abz12]

Morning Cath…

Great explanation.

I see- in the exam I would have picked inventory as a non financial indicator- but your rational and tips for assessing NFP vs FP will really help me think about the options they may give in the exam.

I never thought of inventory as a measure of liquidity but you are right- we have the inventory days calculation which is a liquidity performance indicator.

I will use the other ways try to identify the difference between financial and non financial indicators you suggested. After all it may help eliminate some answer!

Thanks from Abi.

[abz12]

thanks cath. I am not sure if my responses are being saved! but I will post again. Thanks. I will need to work through the example again and exercise 5. So will come back if I have questions.
thanks

[abz12]

oo yes! its exam season for me you see! I am trying to clear p2 in time to do the case study in Feb! So no rest for the wicked!

Thanks for the explanation. Makes sense.

[abz12]

thanks for the detailed response. I will add these notes to my revisions pads and prepare for such questions just incase it is examinable.

[abz12]

I had the same issue/ confusion too. Great detailed explanation Cath

[abz12]

thank you cath.

you explained it very well. Please do let me know if it is examinable. 😉

[abz12]

I have seen another question on backflush. Is this is the syllabus?

q) Which of the following are disadvantages of backflush accounting? Tick all that apply.

? a-It may encourage managers to produce for inventory.
?b- It may not be possible to use it for external reporting purposes.
?c- It may require complex production controls.
d- It may require complex allocation of overheads.

[abz12]

thanks cath

[abz12]

thanks for explanation.

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