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Sir, In the example I agree with the amount owing at time 1 that is 10600. But after that 5454 is paid, how we come up with this amount (5454)?
Secondly in last line you said 5146 is mix of interest and capital. How is that?
According to me 5454 should be the amount which consist of interest and capital.Oh Sorry.
I want to know what else I should do to ensure that I could tackle all questions?
I mean that I practiced 50 questions and despite of that I couldnt cope 14 marks part, that part was from Merger Acquisition, and I was strong in this section, but could handle in paper?Same is the case with me. I attempt 78%, but I am highly confident on 78%,,but unfortunately I struck in question 3 last part and so was not able to give last few minutes to those theory part which I left.
I spend more than 1 and a half month on kit, and at least practice each question thrice, but still i wasnt able to cope question 3 (14 marks) Now i thinking to start the preparation, since i is difficult to clear p4 by attempting just 78 marks.Sir i have same question, how 4.7 and 3.7 is calculated?
It should be 4.3%(3.8+0.5) if rate gone up, and 3.3% if rate gone down.
Please explain.sir please describe how do we know we company have to receive and which to pay after we making the column of total recipts and payments?
No problem sir. I can understand.
One more thing i need to know that is you said that when we use lock-in rate then we have to use lock in rate for the no of contracts, but in Question CMC June-2014 you have use the today future price, instead of lock-in rate why?Part b Black-Scholes
Pa is 36.79 and Pe is 31.4.I dont understand how 36.76 is calculated, I mean to say the logic behind the calculation, i understand the calculation involve in but dont understand why we are doing?
Please explain this?In this question the tax shield and subsidies loan is first converted into domestic currency then it is discounted @ 5%(interest rate for $)
A-If i choose the risk free rate i.e 3%, the rate in Gamala(the foreign country where Tramont is interested) then the saving will be converted to $ after applying discounting 3%. Is it correct?
B-What is the explanation i need to write if i use risk free rate for the tax shield?
These are the common assumption usually taken,
1- Assume that the cash flow and growth are accurate
2-If working capital information is given than we assume that year 1 working capital is taken from debt and rest is taken from the project itself
3- We assume that when two entities have similar operation than the business risk is same but It may possible that business risk could be different due to the geographical differences, etc.
4-Deb has no affect on credit rating unless other wise stated.
5 Often in exam government interest rate is given and we assume it is the risk free rate.
Sir please identify if I am wrong any where.-In question Neptune(6/08) it is given tax is paid after 1 year , and first capital allowance(C.A) is taken in Year 1.
-In question Burung(6/14) co tax is paid in the same year and in this question C.A is also taken in year 1 !
-In question Your business(6/09) part a it asked for the sensitivity analysis of increase in $1M in capital expenditure and so we have to calculate the C.A for evaluating the affect of additional $1m and here tax is paid in same year, here first capital allowance is taken to t0(Year zero)!Why is there inconsistency ?
OH !
Yes there are no profits. We have to carry forward 20.
But why examiner didnt add 20 after subtracting?
I mean 20 is deducted first ,agreed. But after that it should added 20I am sorry but i didnt understand.
We can also carry forward the c.a x tax rate i.e actual saving amount, instead of -20 which but this do not give same answer.Thanks. I solve the 2nd issue(Real cash flow).
Please explain only 1st problem, the one relate to taxOH…!
Thanks God.
Finally I get the point, This was actually the point which was disturbing me.
Thank You Very much 🙂 🙂Sir I am not satisfied with the tax calculations, the capital allowance on straight line basis is calculated in Fubuki co deducted the machinery value at the end from the the cost and then apply the rate i.e (3M – 0.4)x 25%=0.65m and so tax saving0.65x 0.25=0.163m
In this question, chmura the value at the end of period is not deducted?
And second thing is that what is meant by this line is question?
A balancing adjustment will be required at end of 5 year when it is expected that the machinery will be sold for MP500.
Is this the amount at the which we are expected to receive if we dispose?I have no problem in calculating the benefit which each party will receive, in this question it is 0.4% to each, and question also requires the demonstration.
The problem arise when i calculate the ultimate affect i.e the rate at which each party will end up, this is main issue which I have. I fully understand the 2 example you did in the free lectures, I have solve them myself.What was common in those examples and in this question is that the rate at which two parties can borrow on their own is greater then the other combination of floating and fixed.
Like in this question the combination of fixed and floating if CMC and Counter party borrow own there own is higher than opposite combination of floating and fixed.
What if question states that CMC is interested in fixed and counter party is floating, in this case the total will be equal to Floating+3%,
AND if this is exchange i.e CMC floating and counter party at fixed than total is =Floating +4.2%. According to me this will bring loss.Thank you very much,
I know i ask some questions which souldnt be asking at this level, but you answered them.
Thanks again. 🙂It might seems silly but can you describe and briefly explain what is the difference between Forward rate.
Expected spot rate.
For me both are same, and both Interest rate parity and purchasing parity are used to predict the future exchange rate, i dont find any difference between them !.
I would be be very thankful to you if you clarify this.Sir i have a question in the solution(SWAP) you have given.
-This part carries 6 marks will the solution is sufficient for 6 marks? If not what additional points are need to explain?
-Please explain what will be the ultimate affect i.e at what rates two parties would be paying interest at the end and how?
-In the BBP kit solution it is given that counter party(bank) will pay 2.4% and CMC receive 2.4%, how is that?