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This was a difficult exam.
Question 2b
Was it about explaining Building block model or simply describing whether the rewards set in the given model would encourage the dentist to perform the standard.
Was there need to explain the benefits of building block model or just talk about the appropriateness of the rewards themselves whether motivational, controllable and understandable?
@vipulv said:
thanks. I am little worried i messed up question 1 and 2. I have no idea how MCQwent. I expect high marks from NPV.. and i missed as i didnt read question properly to do book value. I knew how to…as i could do the market value got 10.4% aghhh i hope i did enough.how did you find wacc of 10. 4% using market value. start with capm if you remember. and then with irr. how did you deal with tax on the interest on calculation of redeemable debt before you went into irr. the market values how did uou do them. if I remember shares were 200 million book value and loan was 200 million book value. the shares were 0.50 cents nominal value. I dont remember there market value .
@vipulv said:
Why was forward exchange contract better than hedgin exchange rate? I spoke about being fix rate… spoke about u wont know if u receive the money on time in 6 monrths. Went to briefly mention hedging techniques like translate risk etc am i on the right line??you were on th right track
Question 5 found wacc of 6 % using market values and wacc of 4.5% using book value. I think market value of debt was 207 million and total value including that of shares was $2,547 I dont remember. found irr of 2.7%. dont know if I am correct. capm was 6.3%. not sure though.
on question 5 section B. IRR was the tricky part. In year 0 ,(103.50 ) outflow and then on interest I deducted tax, interest was 6 multiply by tax savings (1-25%)=4.5 THEN multiply with annuity factor. redemption was at a premium to the nominal value. I dont remember the redemption rate. then calculate IRR. wacc using market value and using book value. the capm part was straight forward.
on question 3 section b. Part a, was calculate capital loss/ gain and explain why forward exchange contract are better than hedging. I think it was €1,200,000 ÷ by six month forward rate which was lower (LESS BETTER OFF) less €1,200,000 × lower spot rate. I think I found a capital loss. Part b, was find the interest rate of another country having given interest of the home country. the given interest was 4%. I user interest parity to formula. I used forward rate of twelve months lower rate and spot rate which was lower and 1 + ic or 4% at the bottom of the formular. part c was to explain why invoicing in local currency was good or bad to avoid exchange rate risk.
question 2 section b. PArt a. was calculate market value of loan. using Po (1+g)^n R. the trick was on g. I used share price movements rather than EPS within the years. 10.90÷9.15. g was 6%. making conversion value to be $131. market value was then calculated as redemption was unlikely. part b was share price using P/E RATIO. the trick was wether to use industry p/e ratio. I used industry multiplied it 2014 ep. don’t know if I was correct.
question 4 I failed. I included interest. stupid me.
question 1 part a was fair. cash budget. though very tricky in wording. will score some marks but not all. it was 5 marks. had no time to complete b and c of question 1.
mcq questions I section A were very difficult. Most of them I guessed.
Overall it was a tricky hard paper.
Guys. Can you help on the learning curve.Q3 I used the cumulative units as 8 then the second cumulative units as 7. Calculated the difference and applied to the month of november for the 8 units multiplied by 12. the previous 8 units used the hours I found when calculating the leaning curve ( which had 8 cumulative units) multiplied by 8 and multiplied by 12. Was I wrong. Pliz help???