[Joanna]

Hi Sir,

I do not understand certain statements in Lecture 5 and 6.

Lecture 5 : Vertical Integration – expansions up (backwards) or down (forward) the supply chain. Does it mean that the company will take over the supplier who will supply them raw materials, and take over the supplier who does the packaging for them?

Lecture 5: Concentric diversification – new products/market with technological/marketing synergy with existing products/markets. I do not quite understand this statement? – Does it mean we try to develop new products in existing market, and existing products in new market. However, it must be related expansion?

Lecture 5 : What is meant by cross subsidization within the group? Does it mean something like transfer pricing?

Lecture 6: It is expected future dividends that determine the share price, and therefore the shareholders should be indifferent between the alternatives outlined above.What does the alternatives refer to? Alternatives refer to that it is not dependent on the level of profits?

Thanks for your help.

[Joanna]

Dear Sir,

I listened to the online lectures (video recordings) in which there is this example.

I understand the rationale of doing MIRR, however, i do not know why do we have to take (Time 4 flow * 4 yr DC factor) and not take (Time 4 flow divide by Discount of 4 yrs) to get present value since the formula is FV = PV (1+i)^n.

Thanks!

[Joanna]

Hi Sir,

Can i check with you how come ROI allows comparison for division of different sizes?

ROI = Controllable Profits/opening capital employed.

If company A is twice the size of company B, its controllable profits will be twice, its opening capital employed will also be twice. Whereas Company B controllable profits & opening capital employed will be lesser as compared to Company A. Does it mean its impact will be net off and thus we are able to compare?

Thanks!

[Joanna]

Hi Sir,

Thanks!

With regards to Lecture 11 recording (11:24 mins), you mentioned that “its capital is less, and therefore the return on investment and residual income are both less”

How come it isn’t if capital is less, the return on investment and residual income should be greater and not both less right?

Thanks!

[Joanna]

Dear Sir,

No, it isn’t in the junk box.

I have tried unsubscribing and subscribing again.

Thanks for your help!

Appreciate it.

[Joanna]

Dear Sir,

Thanks for your help 🙂 However, i am still not able to receive any follow-up replies based on this post only via email.

Maybe it could be so technical issue on my end.

[Joanna]

Dear Sir,

Sorry to disturb you. I think previously i have turned off notifications of follow-up replies via email.

So if i want to get the notification back (ie: getting the follow-up replies based on my post only), i will need to click “subscribe” on the top left corner? So that means for that post, i will receive follow-up replies via email?

Thanks for your help!

[Joanna]

Hi,

If the email notifications had been turned off previously, is there any way to turn it back on?

Thanks!

[Joanna]

Thanks Sir.

Sorry, it was my fault in writing discount rate as discount factor as I thought it meant the same thing.

[Joanna]

Hi Sir,

LOL cards answers

– EVA is equivalent to discounted cashflow in the long term which is a widely used method of valuing shares by equity analysis.

Will appreciate if u can explain the above statement as I do not understand the statement above.

My understanding is that EVA is derived from NOPAT- (wacc * capital employed)

Thanks for your help.

[Joanna]

Sorry, but how can it be a problem to the capital employed ?

[Joanna]

Hi Sir,

Will appreciate if you can explain on this statement “EVA encourages investment for the future (eg advertising and development) by removing such cost from the performance period and treating them like capital expenditure. This will reduce the dysfunctional temptation for management to engage in some short term decision making which can be a problem with capital employed figure …..”.

Thanks!

[Joanna]

Thanks! Btw, is planning gap and profit gap means the same thing?

[Joanna]

Hi Sir,

I managed to post queries on P5 Ask the tutor forum.

Thanks and sorry for the trouble.

Regards,
Joanna.

[Joanna]

Meaning my final answer for MIRR using DF of 5%, 10% is different from MIRR using DF 10% and 20%.

[Joanna]

Hi Sir,

What I meant is the compute terminal value (incorporating opportunity cost of capital into cashflows) then compute IRR in the normal way. If i use DF of 10% and 20%, the answer I get is different from DF 5% and 10%. So is it normal to get different answers due to different discount factors being used?

[Joanna]

Ok thanks 🙂

[Joanna]

Hi Sir,

1) share price = P/E * EPS
= price of share/earnings per share * earnings per share

2) total value of firm = P/E * total earnings of the firm. But in this case the P/E is it still price of share/Earnings per share or Price of share/total earnings?

Thanks for your help 🙂

[Joanna]

Hi Sir,

Just to confirm for duration, we will need to account all the cashflows PV of cashflows (recovery phase and investment phase) * no of years/PV of all cashflows? However if qns only specify recovery phase then we will focus just on the recovery phase?

Thanks for your help 🙂

[Joanna]

It is from Jonas Chemical Systems from BPP revision kit.

[Joanna]

Hi Sir,

Yeah, but from an example in a qns on Macaulay Duration on the project to build a distillation facility at the pembroke plant, the answer given didn’t include the PV of investment phase. They calculated the PV of recovery phase * no of years / PV of recovery phase. Hence, I am confused now.

[Joanna]

Hi mike,

Based on the above qns, the answer given was that they split out the cash portion vs the equity portion as the company should have offer the employees either cash based or equity settled. Then it depends on whether the employees will exercise the options. I do know understand how come they treat it as a compound instrument as they compare the fair value of cash settled (phantom shares) vs equity settled to derive the equity potion before working out the entries.

It seems like employees has the choice to choose between exercising cash settled vs equity settled.

[Joanna]

Your explanation is simple and concise.

Many thanks for your help !

[Joanna]

click “exam entry”, then click “amend exam entry”… Then change the variant accordingly. The last day for amendments is on 26 Oct 2015

[Joanna]

Just click amend the exam entry… It should be fine. I changed mine in sept.

[Author]

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