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@olshevskiy said:
Q3 (c)
EVANPAT 10
Add: Interest 15
Less: Tax effect on interest (3)
Add: Capitalization of ad. expense 0.6
Add: Accounting depreciation 6
Less: Economic depreciation (14) ?? amount
NOPAT 14.6Capital employed 250
Less: accumulated economic depreciation (16)
Add: Reversal of provisions at the beginning of the period 4.8
Adjusted capital employed 238.8WACC=0.6*0.1*(1-0.2)+0.4*0.12=0.096=9.6%
EVA=14.6-238.8*9.6%= -8.32Any idea??
I got the same for NOPAT and WACC but i think i got a different CE… either way im in the same boat as you, negative EVA, value destroyed! With a comment should pick up most of the calc marks, maybe 8-10 of the 11 here….. FINGERS CROSSED
Q1… cascading down the business through CSF’s and KPI’s… went for some points around the performance pyramid and spoke generally, ZBB marks were pretty easy to grab with general definitions, characteristics and comparisons to incremental which was used in the case.
Q2… UCD seemed as though the issues were clearly in the case study to pick out and develop into points in the answer… easy marks here it seems? basically time, cost(long term cost benefits), reliability, flexibility and differentiation improvements with a UCD.
Q3… EVA calc, not sure if i added or deducted the right depn, one way meant a huge value destruction and the other a small value added… i ended up with a destruction and made the point to compliment the figure i got. Hopefully that gets credit!
Fingers crossed for the results!
@christa316 said:
How did you guys arrive at this figure?What did you do for the year 1 and year 2 tax losses? Did you add back the tax credit on the cash flows?
Did you add it back as a tax credit so that there was a nil effect since it really wasnt a cash flow?
Based on the answers I believe that is what is causing my NPV to be 3,013 million versus this 1170 that everyone is doing. since I belive it was 2,230 in year 1 and a smaller amount in year 2. That times the Cost of Capital of 12% would have made the difference
I am pretty sure there was a line in the question scenario that prompted me to specifically add the tax losses into the FCF figures for the particular years and discount at 12% for the NPV. I cant remember exactly what though! :S
Q1 was tough but i think i wrote enough to gain some marks, done several different calculations for the current and new bonds etc. Plus i think my format and layout would achieve the full 4 professional marks… which could be the deciding factor!
Done Q2 and Q3, of which Q3 was an absolute godsend! More like F9 stuff. Basic ratios ROCE, GP%, OP%, Div cover, Asset T/O, Share price changes, Gearing, etc… Then to discuss the ratios is basic stuff really. Excessive cash surplus’ in this scenario? Could have been better utilised investing in other projects to earn greater returns for S/H’s?
Q2 & 3 may have saved the day, ill be surprised if anyone enjoyed Q1 😀
@mansari said:
My NPV was $ 1169IRR 15% MIRR 14 %
I had exactly the same $1170 NPV – accept the project.
IRR was 0.5% under the required – shouldn’t matter because IRR is not an absolute measure of return.
MIRR was 0.5% greater than required and is a much more accurate measure than IRR – accept the projectIm glad someone else got these answers 🙂
Can i just ask if in Q1 people calculated the ratios given in the industry average but for the company in question. It really didn’t seem like it was asking for any ratios specifically but i did them anyway to hopefully get those extra 1-2 marks :S
Time was ok thankfully, question 2 and 4 were a godsend! Easy marks for theory and application on the mendelow matrix and similarly for the ansoff matrix… just hoping they will outweigh my question 1 ?
Q1a was a bit of a lifesaver in this exam i felt? Anyone else?
The basic workings for net assets, goodwill, nci, etc were very straightforward. FV adj for the land in the first sub, FV plant and depreciation on it for the second sub, no impairment for goodwill… the toughest bits on that question were the additional notes for me
@aries134 said:
A bit confused on Q1 about the second subs..
Another confusion came when Q gives amount of profit that accrued evenly for associate.. Not sure what to do with that..
After all I’m glad because SOFP came out..
Sad since cannot answer AT ALL factoring (recourse & non recourse) – 9 marks, Q3a manufacturing unit (which standards apply here?)- 9 marks, Q3b licensing agreement + legal costs (no idea when I read the requirement – “derecognition of licensing agreemet”) :((((, Q3c deferred tax asset – 7 marks..
HOPING FOR GOD’S MIRACLE TO LET ME PASS!The profit accrued evenly for the associate is relevant because it was an associate for 6/12 months of the financial reporting period. Somewhere in there was the $20m profit for the year x 6/12 giving share of associates profit before disposal of $10m. Im guessing this is what needed to be included when working out the gain or loss on the sale of shares in that associate to lose control. Something along those lines anyway…
The deferred tax asset they wanted to recognise, something along the lines of tax losses cannot be accumulated and held for future tax gains unless its likely the business will be profit making in the future…
They were expecting to make losses for an additional 4 years, so this must mean its not allowed to be recognised…
Something about a going concern status in there? Im sure tax assets cannot be held in a going concern scenario?
That was a pretty tough and testing paper to work out the specific areas they want answers to focus on!
Factoring is a topic studied at a much lower level, i remember it from F3 or possibly F7, surprised when that came up. Factoring with recourse is not passing the risks of the debt going bad to the factor as you would have to refund the factor if this happens.
Without recourse the factor bears the risks, but something in the question stated that the longer the debt remains uncollected the more the business would have had to pay in interest… or something along those lines?
It really is basic receivables stuff. Basic double entry of when the cash is received the receivables is wiped out and a provision for bad debts is created, etc etc etc
Hard to get 9 marks there though, not sure if others found it the same!