[sehrish]

Ok thanks, it was required to make analytical report plus definitions of some terms

[sehrish]

OMG I’m so happy , I couldn’t complete my paper, I just did 65 marks papers and I’m passed at 50, Thanks Jesus, I’m affiliate now
I would like to thank p4 tutor, Mr. John Moffat, I did self study and opentuition tutor helped me alot., tnX loads

[sehrish]

Thank you so much for all your help

[sehrish]

Ok thank you so much

[sehrish]

Ok thank you so much, watching this lecture
Which of the following is an acceptable way to start report

Just a simple line as examiner has written ” Report to the Board of Directors,Avem Co”
Or
To Board of Directors
Avem Co
Introductory paragraph

In old past papers they followed the 2nd approach
I mean this worth 4 marks I don’t wanna lose them with incorrect start

[sehrish]

That’s okay, I received that from becker, but I don’t want to waste time if it’s not the part of syllabus. I’ve not seen any past paper with such question. I don’t know why they included this part in compulsory question

[sehrish]

Thank you so much for your help

[sehrish]

And I want to ask that is index calculation is part of p4 syllabus
If so then please direct me to an online lecture
Thanks

[sehrish]

Ok thank you so much

[sehrish]

Ok thanks loads, i got it now

[sehrish]

Ok thank you so much, I understood the first question but still confused in the last one.
Company has enough other profits to absorb capital allowances from this project, it means that if there is loss, in say yr 4 then we can carry forward or same yr whatever the policy of company is. if nothing written like above, then what will we do?

[sehrish]

Ok thanks, I got the part a, my mistake for N(d2) in part a, it wasn’t required,
but b asks to estimate the financial impact of the director’s decision to delay the production of game using BSOP Model
Part b as aforesaid And they used call option to value the delay of project
And I apologize I just noticed that drop down list contains a separate head of Ask the tutor p4., I’ll keep that in mind for next topic and i hope it’s okay to continue this thread here

[sehrish]

In part b of this question To find the option value to delay
D1 is 0.617 and D2 is 0.193
FOr N(d1)= 0.5+0.2291+0.7x(0.2324-0.2291)= 0.7314
N(d2)= 0.5+0.0753+0.3x(0.0793-0.0753)=0.5765
How did they calculate?

[sehrish]

Ok Thanks loads I got it now

[sehrish]

Ok thanks and for calculating the wacc of combined company, Ke of acquirer will be used in valuing the new shares in Wacc, is it correct?

[sehrish]

Hi tutor,

My question is
As For all shares after acquisition, share price of acquirer applies and is it same for cost of equity? while calculating wacc.
In BPP calculation they used 2 types of cost of equity, Ve of Paxis (acquirer) at its Ke and Ve of wragger at its pre acquisition Ke. Rather than using Ke of Paxis
Please explain

[sehrish]

Ok, thank you so much

[sehrish]

Ok thank you so much, gonna watch that lecture,

I calculated profits on option to claim back, gain on exercising option is $10153
I need to convert it into local pounds
From the rate ($/£) 1.9029-1.9081
I’m using selling rate 1.9081 as I’ll sell the dollar gain to get my local currency, as dollar is first currency so I’m using sell rate,
Plz correct if above mentioned is wrong
Thanx loads tutor for being helpful

[sehrish]

And 2nd question is
While calculating currency option @ ex price 1.92, closing spot 1.9029
Claim back profits of option is 0.0171x19x31250= $10153/ 1.9081 1.9081 is selling rate as should be, while in book solutions they have used 1.9029 which is buying rate
Why?

[sehrish]

In this question we can find out closing future rate as,
Spot future
1st jun 1.9156 1.8986

31st Oct 1.9029 1.8980

Basis risk 0.017 x 2/7 = 0.00486
1.9029-0.00486= 1.8980
But in the exam kit solutions, they added 0.00486 + 1.8986=1.9035
In all other questions I’ve been following that if there is increasing trends so add the monthly apportioned basis risk or vice versa , it’s very confusing
Plz guide me
Thanks

[sehrish]

Now 2nd question relates to adding interest saving from cancellation of debt, in Doric proposal 2 says to restructure, unsecured bonds are cancelled and replaced with ordinary shares, while calculating income position money saved from interest on debt due to the cancellation is not included as interest savings

while in Evertalk, in proposal of restructuring, bond are cancelled and ordinary shares are issued to existing bond holders, same situation as in Doric but
calculations of free cash flow of the company includes interest saving on existing bonds which are cancelled in restructuring
I want to ask why in 1 questions of restructuring they added interest saving and in the other they ignored,
Thanks

[sehrish]

I’m sorry I just checked it out, there are 2 questions named Doric in the book, one is pilot papers questions and the other which I’m talking abt is December 2010 question no 1 Doric
But I’m creating a new topic with same questions to avoid confusion for others in future

[sehrish]

In Doric 3rd proposal is management buy-out, In the solution
Estimate of the value of new company:
cash flow before interest payment is 28.4m
Then it is written as:
Estimated value based of cashflow to perpetuity = 28.4/(0.11-0.05) = $473.3 m
While cost of capital is 11%, i want to ask why 5% is deducted from 11%

Now 2nd question relates to adding interest saving from cancellation of debt, in Doric proposal 2 says to restructure, unsecured bonds are cancelled and replaced with ordinary shares, while calculating income position money saved from interest on debt due to its cancellation is not included as interest savings

while in Evertalk, in proposal of restructuring, bond are cancelled and ordinary shares are issued to existing bond holders, same situation as in Doric but
calculations of free cash flow of the company includes interest saving on existing bonds which are cancelled in restructuring
I want to ask why in 1 questions of restructuring they added interest saving and in the other they ignored,
Thanks

[sehrish]

Another question similar to Doric is evertalk from June 2003, in that question while doing restructuring, they have considered the interest saved upon cancellation of current bond, while in Doric there’s nothing like that, which approach is correct as there’s nothing written which says to include tax saving in cash flow, as cancellation actually have no impact on cash, both questions are almost same

[sehrish]

Hi tutor,
In the same question, part c of management buy-out, to get the value of part’s division of doric they calculated using 6% instead of 11%
28.4/ 6%
Kindly explain?

Thanks

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