[mpatel14]

Thanks for the help. Much appreciated.

[mpatel14]

Thank you

[mpatel14]

Perfect. Thank you very much for the clarification.

Sorry, I’m using the old revision kit which is why the question numbers are different.

[mpatel14]

Thank you.

If I was to calculate it the way in lectures, is my calculation correct:

7%/ 360 days x (60 days old – 35 days new) = 0.49%

The net benefit is coming out different. Can you please let me know where I’m going wrong?

Thanks

[mpatel14]

Thank you for the help. I have watched it but there are some questions which are confusing due to the wordings.

for example for Q17 MCQ on Dec 2014 paper

They have included Loan – 6200 in the calculation for debt. Why do you include this in the calculation if the question states market value?

Thanks

[mpatel14]

Also the questions says calculate market values. So when you answer the question do you only sum up the market values only and not to sum up the values which are book values?

[mpatel14]

Yes it was one of the older edition. Thanks for the help.

[mpatel14]

Thanks

[mpatel14]

Thank you so much for the help. I will watch the lectures again, especially the ones relating to calculate the market value of debt.

In regards to question 8, I did:

1-5, 8 at 9% = 30.328
5, 105 at 9% = 65.2
Total 96

I then did 1.25 x 1.04^5 x 70 = 106 or should it be 1 x 1.04^5 x 70 = 85

And then pick the highest one from there?

[mpatel14]

Thats great. Thank you for the help

[mpatel14]

If the discount was 5% would it mean we’ll have to do 1/95 = 0.01053 then + 1 = 1.015053^(365/25) = 16.5%

[mpatel14]

Thank you. I couldn’t figure out how they got 12% because the question didn’t provide any information to calculate KE.

[mpatel14]

Thanks for the help. I was supposed to be write 2014 and not 2015.

Sorry about answering the other persons question.

[mpatel14]

Hi,

The WACC should be 8.8%

KE = 4%+1.2(5%) = 10%
KD = 6%

Market Value
Equity = 70
Debt = 30

Do the WACC formula and the answer should give you 8.8%.

[mpatel14]

Thank you for the help.

I did watch the lectures once. I believe I need to go through this again.

Also I haven’t seen any questions in the BPP revision book where market value quoted are cum interest.

[mpatel14]

Thanks for the help.

So we need to be aware of keywords such as ‘interest been paid’ or ‘ex interest’ meaning you just use the value in the question.

If it states ‘market value’ or ‘interest shortly to be paid’ then always deduct the interest.

[mpatel14]

Thank you. Apologies for asking twice, I got confused from looking at the BPP notes then then the OpenTuition notes.

[mpatel14]

Thanks for clarification.

I did watch the lectures but after doing some of the BPP revision questions I got a little confused.

So to double check it’ll be:

The average profit will be: Profit before depreciation – (investment / no years) x no years) – Scrap Value) divided by number of years.

The average investment is investment + scrap value divided by 2

Then ARR is the average profit divided by average investment.

[mpatel14]

Thats great thank you for the hep. The wording on some of the questions are not very clear which makes it confusing on which way to calculate the working capital.

[mpatel14]

Thank you for the help

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