[hassan1123]

I thought this exam was proper time pressured.

Q1) This was a managing stock question which required to analyse the impact a proposed discount would have on the cost of ordering (CO), Cost of Holding (CH) and purchase price. I do not think it required to use the actual formula which had the square root involved, rather just calculate: CH = CH x Q/2 and CO = CO x D/Q and purchase price. The end result was that the discount was more prefered as you get a reduction in cost. This question was very similar to a pass exam question. I did not get part b when they asked about the tresury department? did anyone understand that? I just wrote about why it is important to hold cash?

Q2) This was a business valuation question. The way they worded the question was tricky, but I think they were asking for the Net asset valuation model after taking into account the reduction in recieveables etc so it was the liqidation basis. Then The earning yield method, as they gave this percetage in the question. Which is earning/earning yield. the last model was the DGM model. Part B required to say the disadvantages of using a cash basis model? was this just evaluating Dividend growth model?

Q3) was a complete write off. I did not understand any of it. I thought they were going ask a money market hedge question and compare it to a forward but did not expect a full on theory question. I just wrote that the ways to reduce risk were things such as matching concept, lagging and leading etc not sure if that was right?

Q4) Evaluating the use of debt finance. I calcuate stuff like the interest cover once taking into the account of the 8% interest of the 20M raised and made a revised income statement based on the increase in sales and stuff. Then calcuated new gearing, and EPS? thats all, am not sure if there was anything else? EPS Rose so it was an increase in shareholder wealth? there was no info on the share price so it could not be calcuated? or could it? there was no P.E either.

Q5) what a complete write off. They did not give any cost of capital!! I am assuming this question wanted us to do an NPV calcuation based on the five years. There was no corporate tax caculation as there was no operational flow (Sales less Fixed cost & V.C given) therefore, it was just the tax relief obtained from leasing and the lost scrap and lost W.D.A that was obtained from year 2 to 6 even though it was a five year life cycle, the tax was paid in arrears as stated in the question. The overall affect was lease was better. The discount factor to use was 10% subtract the tax of 25% which makes it 8%? But it was debateable if you was suppose to use the fisher equation as there was inflation involved? I am not fully sure about this because it would of been (1+8%) x (1+4.5%) = (1 +i) i being the nominal cost of capital. But in the equation the inflation part needs to be a general rate, but in the question it was specific to the buy option. so I do not know!!

Multiple choice question: It was defo the cost per student that was not efficient, this is because cost is relating to economy (i.e cheapest price objective)

R.O.C.E and the other one – it was neither.

Q1 – it was just transaction and economic risk because it was dealt in a foreign currency. Translation was not the answer because that would mean it would have an effect on the balance sheet, but the questions stated that this was netted of to nil at the end of the year. so it was no effect.

Really struggled on the question which asked to evaluate the % obtainable from the note to maturity? any one else choose 5.1%? the options were either 1%, 5.1% or 7.99% or 7.5% or something?

The multiple choice questions were to hard and worth to much of the paper. one slip up and it basically costs you. hate them!!

Hope that helped!!

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