[fahad132]

_ a. so IRR = cost of debt we will take in W.A.C.C without taxing.
_b. wht if question already gve us cost of debt of reedemable debt , we will assume that it is relevant to take in W.A.C.C and whether it need taxing.
cost of debt gven in jupiter and it is reedemable and it got taxed see
WACC = (4.65% × 0.107 × [1 – 0.25]) + (8.5% × [1 – 0.107])
= 7.96%

[fahad132]

yes Mr Moffat watched already and understood same wrong treatment have been done in jupiter partA 4.65%*75% if u can check when calculatinG W.A.C.C

[fahad132]

Thanks sir i will look at it.

[fahad132]

Sir just like in lectures for redeemable , we were working out the yield by using the I.R.R but that could be time consuming exercise which i worked out.

this is the best way of working out which you explained above and it is clear to me know
thank you very much sir

[fahad132]

sorry sir my question is that can i make assumption by my own self using behavioral finance the criteria above , the points which i made is valid and is able to pass this part of the question.

[fahad132]

Thank u so much sir you made it very clear to me.

[fahad132]

thank you so much sir

[fahad132]

thank so much sir you made it very clear , and sorry about yesterday question i hope you don’t mind.

[fahad132]

3)-
under free cashflow to equity method , which i have learnt from your lectures.

Operating profit (30% of $80m) 24.00
Less tax (28%) (6.72)
Profit after tax 17.28
Less investment in working capital [15% of (20/120 × $80m)] (2.00)
Less investment in non-current assets [25% of (20/120 × $80m)] (3.33)
Less investment in new project (4.50)
Free Cash flow from domestic activities 7.45
Overseas subsidiaries dividend remittances (W1) 3.16
Less tax paid on Magnolia’s profits [(28 – 22)% of $5.40m] (0.32)
Less interest (8% of $35m) (2.80)
Dividend capacity 7.49

Under Bbp , the calculation have done like this

Operating profit (30% of $80m) 24.00
Less interest (8% of $35m) (2.80)
Profit before tax 21.20
Less tax (28%) (5.94)
Profit after tax 15.26
Less investment in working capital [15% of (20/120 × $80m)] (2.00)
Less investment in non-current assets [25% of (20/120 × $80m)] (3.33)
Less investment in new project (4.50)
Cash flow from domestic activities 5.43
Overseas subsidiaries dividend remittances (W1) 3.16
Less tax paid on Magnolia’s profits [(28 – 22)% of $5.40m] (0.32)
Dividend capacity 8.27

difference 8.27-7.49=0.72

[fahad132]

thanks sir , i will do that after completing all kit and recent exam papers.

[fahad132]

yes sir i am using revision kit of BBP valid until june 17 , and will use the recent papers after that.

[fahad132]

part(c)
1)-market will have an expected return of 7.224%. The risk-free rate is
given as 5% therefore the market risk premium is 2.224%

why we didn’t take beta in this calculation , by using formula beta should be taken right?

sorry my question is that when calculating market risk premium we didn’t take the beta ,
as market risk premium is not given in question.

[fahad132]

thank you sir for guiding , i thought there is something theory chapters from which the question will arise , as i have seen in part A above all pure written question , doubt is cleared.
i have good grasp of OT notes , when i struggle in some question i refer back to your notes.
i appreciate your efforts during the lectures and in this forum.

[fahad132]

thank u so much sir

[fahad132]

confusion part is

gain per dentro co share = (3 * 3.644) – (2 * 4.50)/2 = $0.966

if they already arrived at 1,875,000 shares why mutliply combined share price by 3 and then dentro co share price by 2 and deducting one from another.

[fahad132]

i will stick to your technique which i have learnt during the course , some bbp answers really confuses me such as above.

[fahad132]

I covered this P4 course with using F9 notes as well which is relevant to P4 , which i wrote 4 years ago , F9 you made it so interesting and P4 too , P4 case scenario looks little bit scary to me , i don’t know what will happen on exam day , took one month leave from an office to practice questions and to pass this subject.

[fahad132]

I will be much more likely to ask question due to i am self studying and using OT notes , i will ask the stuff which will look more scary to me.

[fahad132]

Thank you very much Sir , it helped me alot
I passed F9 by using your lectures in first attempt and hoping to pass this subject too.

[fahad132]

Yes Sir , Sorry about to post the whole question , i didn’t know about it.
Can you please tell me how we will arrive at the calculation by using these rates ,
these rates i kn0w that has been randomly pick up by the examiner , but the further calculation in these column i didn’t understand , i was trying to use your techniques of swap
which i have learnt during the course but i failed to answer , i have spent hour on it.

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