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Q1 started off ok with 9 marks for RTO but then the problems started. Think it’s very unfair as I can’t see any past exams with this style of question. If anyone can let me know a question that would be great.
Q2 was theory based and struggled with how to approach problems etc. I just commented on the different suggestions.
Q4 seemed like a god send compared to the other questions. I had a negative NPV and positive tax effect but the overall APV was negative due to issue costs. The issue cost on debt was around £136 m (3% of gross) and the issue cost on equity was £200m which produced a negative APV. Did anyone else do similar approach?
I thought that the question stated use market values for debt? I used The Rf +spread to calculate PV of the 4 year redeemable debt to calculate mv. Think it worked out about 1.04 * 120m.
Did nobody do this?
I calculated the maximum price as the MV before to Mv after acq. I believe that that I missed something out as the figures I got did not look right as they were below the premium required by the company.
Not feeling confident with my answers as I felt I was rushing each question. P4 is a tricky customer.
I got them exact figures- this was P/E tho was it not?
The fcfe valuation was 170 * 1.049 / (0.14-0.049) = 1,959.6
Market cap of the company was I believe sound 2,300 including the premium so I calculated that it wasn’t worthwhile.
I thought the contacts where based in € on the contract sizes tho?
The initial spot was calculated as €/$ also but I converted to $/€ to match futures.
I seen cc in € so assumed PUT. As selling €. ran out of time so had to rush through so I have maybe misread.
For the valuation question what value did you get for the two scenarios?
My FCFE workings calculated no gain from acquisition based on 25% premium on market valuation?
Probably messed up!