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@naveedali24 said:
Can any one just convert the 13% into the nominal rate and my ans was 16 %@naveedali24 said:
I also assume that the project is wholly equity financed .. and did you convert the real rate in nominal ?wait what? what real rate? what nominal rate?
@stacky said:
Guys,Do you actually calculate gearing based on Market value of equity instead of book value? (Q3C)
Oh gawd, just when i thought there is hope for a borderline 50, now its guaranteed fail T.T
And for Q1, I sulk big time on the timing of funds for the capital expenditure, i ended up with Y0 and Y2 instead of Y0 and Y1.
well, If there is book value of the equity, you can use that. Am I missing that? is there any book value of equity given in the passage?
@manulik8 said:
what about Var who remembers? I just calculated Var at 95% and commented. what about you ?We were told to calculate the confidence level that the Var will be positive. and my answer was 97%. I don’t recall that we are required to calculate VAR for 95%. I didn’t do that >_<
wait we need to add 0.5% for FRA, I thought FRA is the final rate that we are given by the bank?
Q1. I cant finish the whole thing, so I just calculate up to NPV and write about them and how it can be higher if we also include APV of tax shield and tax incentive. NPV about 6.9 mio.
Q2. I messed up on interest future rates, I used expected future rate as at 30 Aug (through basis calculation) to calculate gain instead of using the 30 September future.
FRA was about 4.25%?
Futures about 4.2%?
Options increase 4.9%?
Option decrease 4.7%?
@Biwowa, I don’t know why your rate is so high? the co’s borrowing rate is libor + 50 basis point right? as in i.e. 0.5% ?Confidence level 97%
Q3.
Part a) I talk about mismatch culture (potentially), local have better knowledge of local teritory, having local partner is a good sign for the local govt (may have incentive), local partner can get the know-how and build its own manufacturing plant,etcpart b) I calculated like this
Louieed co’s PE = 14
Louieed co’s earning = 296m
Louieed shares = 340m
Therefore louieed co’s share price = (14X$296)/340m = $12.18(i) all share -> straight forward but not sure whether this is true or false 90mx2*12.18= 2,193.9 —> therefor the PE of target = 2,193.9/its earning (i forgot)
(ii) all cash –> straight foraward = 90m * 22.75? = 2,047.5 —> PE of target = 2,047.5/its earning
(iii) 60% share 40% cash = same as the above, just do combination.part C) this is the part where I’m lost
But I tried anyway, by calculating the gearing for each of the option above
(i) all share -> no need money only share, therefor gearing = current debt/(mv of equity + current debt), current debt being 540m, mv of equity being (14* ($296+$20)) I assume that all tax synergy will be enjoyed by Louieed co. EPS will be ($296+$20)/ (340 + (90×2))(ii) all cash –> need money 2,193.9, but I deduct with the cash available in louieed an tidded, the balance I did the same this as above.
(iii) dont have the time to do this.
Q1 – My god that was long, he should have let us use a computer not a calculator for that question. There were 2 options, with alot of number to calculate. I know I made mistake somewhere in the calculations as I ended up with $ 194 million positive NPV (impossible) for options 1 ($200 part/units and $20 million royalty). And not enough time to calculate options 2.
Q2 – Bit confused of what the conclusion should be, my conclusion was that it was not the right time to sell it, as they will get a very low valuation due to the condition of the T&L market and the condition of Oden’s its self in 2015 (decrease of net profit by 50%). Looking at the market ratios, it have some indicators that the market is in a recovering stage (higher share price, higher earnings per share). They should wait for a better time (i.e. better market condition and better performance from Oden).
Q3 – Don’t know what to do, the only mark I can get was from the MBO and the advantage of MBO.I guess, I’m screwed.
This is what I remember from Q2.
Current Libor = 3.8%
Might increase or decrease by 0.5%This co can borrow at 5.5% or Libor + 0.4%
Counterparty can borrow at 4.6% or Libor + 0.3%
This co will get 70% of gain on swap, permium 0.1% charged by bankStrike Put
95.50 0.662
96.00 0.902Calculate the hedge option.
Did I miss anything? feel free to add.
After recalculating this at home, with sufficient time. I get the following rates:
1. Options rate ranging from 4.36% (95.50 and Libor decrease by 0.5%) to 5.34% (95.50 and Libor increase by 0.5%)
2. Swap rate of 5.04% despite increase or decrease.not sure whether this is right or wrong.
I obviously did wrong in the exam, damn. I messed up on how to recognised gain between call and put option and I didn’t add the 0.3% to the initial interest calculation.@williams1977 said:
but in the above you have not used gordons growth model, and it sounds like a lot of people used that way to calculate the MV of Fugae coI did, to derive the mv of fugae I used ggm + debt value. I just realised, i should have not add debt.
@williams1977 said:
Can someone please clarify in Q1 the question said something like “the share price is $7.5 which is a multiple of 7.2” and they hope earnings will be a multiple of 7.5?Was this just a red herring, false information there to mislead us
this is what I do, $7.5 is meant for us to get the MV of Nahara Co. and then 7.2 is the FCFE multiple, meaning FCFE x this multiple should equal to MV of Nahara Co. Hence, we got the FCFE. Then the question said that the combined multiple will be 7.5. Meaning that, (FCFE of Nahara Co + FCFE of Fugae co + synergy) x multiple = MV of the new combined company. To get the additional value. MV of the combined company – MV of Nahara Co originally – MV of Fugae Co (however I used 1.3x Fugae co MV instead, as this is what Acem co were requested to pay).
CMIW
@vinograd said:
So many topics which required long detailed calculations were covered in Question 1. The examiner made it as difficult as only possible. Apart from calculations which we are expected to be able to perform under the syllabus, we had to find out some numbers for this calculations in the mess of unclear info, make guesses what the examiner really wanted from us under the examination time constraint. In question one it was unclear whether to discount the project at cost of equity or to use WACC. At first I discounted cahflows at ke, but then I changed my mind and calculated WACC. I stopped several times during question one and thought that I might had been doing something wrong… Question killed my brain and motivation to go on. I started question 2 and did not even attempted any other question.I think it should be Ke as the cash flow given were FCFE?
@brizraj said:
Hi Felix
Refer to the examiner’s answer for Dec 12 Q1 Coeden Co
Same approach was required. It is some sort of weighted averageThanks, meaning I need to sit for the June exam. my approach was
Beta Asset^2 = Beta non-lux^2 + beta lux^2never thought that it would be as easy as weighted average the beta.
@nabiil said:
Can someone just recall me the question parts in number 3 please.1st part was on calculation of missing info…then…
something about legal risk on taking drughi project. I made that sh*t up. lol