Forum Replies Created
- Posts
I think we had a different paper, as my Q3 was about an acquisition … candidates are given different papers now it’s done via CBE so not everyone will have done the paper as you?
Well in that case it’s helped to put your mind at rest which is good … and it’s given me the chance to properly reflect on the overall question… which I’m now feeling better about because I think I was overly focused on the bits of calculation that were tricky. Best of luck … we’re both close to the finish line where we can start can start to enjoy life without having to manage everything around exams and studying lol !!
Yeah or I may have made a mistake and you may be right ????? … either way marks will be there for the other bits and method. I just recall seeing two outstanding basis amounts next to each of the two futures provided in the exhibits and deducting the relevant one from the opening price … it did have the standard bits about assume basis reduces to zero and that there was no margin requirements so maybe that’s what you noticed… the joys of post exam evaluation hey ?.
I’m a bit hazy but here’s what I recall … something like 10 marks for calculating COE, COD and COC. The cost of debt was really tricky but cost of equity using betas, capm and then WACC should be enough to pass with any for cost of debt calculations / method a bonus. Then 10 marks for hedging the investment and loan (futures and swaps). I think if you’ve got the right type of contract for the futures, the no. Contracts and calculated the correct gain for and used the right approach for the swap that alone would score half the available marks.
The remainder of the marks were prof skills (10 marks) and commentary on the results of the hedge including limitations and assumptions (maybe 7 marks???) setting up a new treasury dept (maybe 7 marks???) and then (6 marks) commentary about using project a specific cost of capital, how to improve the firms credit rating and using the swap rate as the firms overall cost of debt.
My reflection is that the key this section and scoring really well was to nail the commentary and prof skills marks which on reflection were there for the taking, and do your best to get the easier calculation marks which were harder under pressure.
If you could pick up 8 prof skills marks, 16-17 on commentary you’ve already passed the question, so with only half marks for calculations (say 10 out of 20) you’ve given yourself circa 34-35 marks and most likely a pass for the exam even if the other questions were not great.
So if you followed a good report structure and did well on commentary you’ve likely done better than you might be thinking?
I think you would get method marks for sure, if it was circa 4-5 marks and you got the other bits right still possible to score really well. Outstanding basis on the futures was given in the exhibit, can’t remember the amount but was more than zero. Doesn’t change the fact you can score well if you calculated the no. contracts, identified the buy/call requirement and calculated the amount of interest received correctly?
On the 3 year bond you had the coupon rate and final amount so I think you had to calculate the price of the bond then use that and the expected cash flows to work out the yield to redemption. Then use the required yields from all three (after adding the credit rating basis points) to discount the cash flows on the firms bond to establish its cost of debt (IRR) and market price which could then be used for the market value of debt in the WACC etc. I suspect I made mistakes as I couldn’t remember what rates to use to calculate the 3 year bond but hoping I pick up method and OFR marks
They provided the outstanding basis so I believe they wanted us to use that to work out the lock in rate (opening futures minus outstanding basis) and then simply calculate the outcome using that rate. You don’t always have to calculate the gain or loss on actual movement in every question unless that asked for, so here you could just use the lock in rate. I would guess marks might be identifying the right type I.e. call to protect against a fall in rates (1 mark), no contracts (1 mark), calculating lock in rate (1 mark) calculation of expected receipt (1 mark).
You had the same paper as me … I tink the cost of debt, equity and capital would be deemed the investment appraisal element … but I think that’s poor and it’s should be fully tested as indicated with a full question.
I made some good points about mezzanine finance and these were well explained, except for they were not specific to the scenario which I didn’t understand. Hopefully I will pick up some prof skills marks and commentary marks and maybe a few basic calc marks but I gave up on those and just used assumed amounts after a certain amount of time …. Felt disheartening but probably the right technique
Well done for not panicking and giving most of it a go. It really is a time pressured exam, and as much about trying to understand all the info and what’s needed. I really felt worried when I looked at all three question requirements and the amount of info. I just hope I pick up the professional marks and did enough on the first two questions to get me over the line with a part answered q3. Best of luck.
Mine was tough – q1 was a combination of valuation of debt, equity and capital, but using yield curves etc made it really tricky, then it moved into hedging using futures and a swap which was time pressured. Commentary sections were good tbf. Q2 was a bit different regarding calculating expected dividend using geometric averages and other info and then a detailed evaluation of dividend capacity. The final question was an absolutely awful business valuation. Couldn’t understand the requirement so will have scored very few marks for basic calculations but hopefully some OFR marks for then commentary and professional skills. Overall borderline … you know it’s tough when you look for your preferred question to ease into the exam … and there it’s not one !!!!
Mine was tough – q1 was a combination of valuation of debt, equity and capital, but using yield curves etc made it really tricky, then it moved into hedging using futures and a swap which was time pressured. Commentary sections were good tbf. Q2 was a bit different regarding calculating expected dividend using geometric averages and other info and then a detailed evaluation of dividend capacity. The final question was an absolutely awful business valuation. Couldn’t understand the requirement so will have scored very few marks for basic calculations but hopefully some OFR marks for then commentary and professional skills. Overall borderline … you know it’s tough when you look for your preferred question to ease into the exam … and there it’s not one !!!!
How did everyone find today – I thought the paper was very common sense, rather than models etc. overall I thought it was a good paper?
What I did may be wrong – that’s the problem with too much analysing after the exams finished – you assume you’re wrong and everyone else is right!
I had the lease as slightly cheaper and the next q implied this was correct … it said other than NPV cost
Section A was good and section C too – AgeAid which was a NFP with a lease or buy decision and then a WACC for the other Sect C Q. Lots of commentary / discussion marks available – CAPM & DVM, 3Es and VFM, why a lease v buying, and link between cost of finance and creditor hierarchy.
However – section B was brutal!!!! FX question & Working capital were horrible but the business valuation was ok. So overall I voted ok and am hopeful for a first time pass.
75% first time pass so I’m delighted and looking forward to FM as I found AA tricky for sure.
From memory I selected the option for just one colleague as they were being asked to sell non audit services and her partner was in the marketing dept in a responsible position, assuming it was the same question
I agree with the comment above on section A, which I found harder, particularly as there were a lot of questions that required two or more responses as the answer. However I found Section B surprisingly ok, with questions that were challenging but achievable if you had put the work in so I’m hopeful for a first time pass overall.
