[SAS1SOF]

You were supposed to use “Cost of Goods sold” or Cost of Sales(For WIP and Finished) in —other words for the Working Capital Question.

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So, do you mean “Cost of goods Sold” and ” Cost of Sales” is the same figure for the question?

This does not help me a lot, because I have calculated 60% markup instead of margin and used the wrong base for Finished goods and WIP days. Probably, this stupid mistake will cost my head on that exam.

[SAS1SOF]

The answer to the working capital cycle is indeed 73 days and the purchases weren’t a distraction it had to be used for calculating the payable days and also for the 6 marker analysis question that followed it.

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Isn’t it for 3 marks?

1) Cash operating cycle – 6 marks
2) Analysis of how to reduce the Cash operating cycle – 3 marks
3) Miller – Orr – 5 marks
4) Cash Management motives – 6 marks.

Finally, can you tell me what base used for the calculation of the material days? I used the figure given in the question, so payables and material days were calculated with the same base.

[SAS1SOF]

Regarding Section C – Cash Operating cycle, I used the cost of sales to calculate WIP and Finished goods, but I think should have used the cost of goods. Can you remind me if it was mentioned that the Material purchased on credit was 90% of the production costs?

Regarding Section C NPV calculation for a project (not the PI) – It was said to ignore the tax (corporate tax and tax allowable deprecation)?

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Additionally, what do you think about the inflated fixed costs of 35,000 in Section C (NPV calculation)? Was it for the project life or should be taken per year (5 * 35,000).

[SAS1SOF]

Thank you Kish for the NPV not tax answer – makes me happy.

What about the Cash Operating Cycle – Do you remember WIP and Finished Goods? How did you calculate them?

[SAS1SOF]

Pecking Order Theory. I believe –

1) Retained earnings
2 Bank Loan
3) Stock Loans
4) Equity

I was surprised by the presence of Bank Loans but decided that Bank Loans are shorter than Bonds and cheaper which will reduce the WACC.

Am I right?

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Yeah, I had the same question and this is the exact order I put so hopefully it’s right! pretty sure equity is the lowest in terms of financing while retained earnings & loans were further up the chain due to their lower costs.

Feeling grateful I missed that sensitivity analysis 20-mark question some people had. sounds ridiculously tricky. For section C I got a mixture of working capital management (Cash Operating cycle/Miller Orr & Discussion on trade receivables & NPV/investment apprasial+capital rationing.

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Regarding Section C – Cash Operating cycle, I used the cost of sales to calculate WIP and Finished goods, but I think should have used the cost of goods. Can you remind me if it was mentioned that the Material purchased on credit was 90% of the production costs?

Regarding Section C NPV calculation for a project (not the PI) – It was said to ignore the tax (corporate tax and tax allowable deprecation)?

[SAS1SOF]

Pecking Order Theory. I believe –

1) Retained earnings
2 Bank Loan
3) Stock Loans
4) Equity

I was surprised by the presence of Bank Loans but decided that Bank Loans are shorter than Bonds and cheaper which will reduce the WACC.

Am I right?

[SAS1SOF]

Sycamore question was not so difficult for me, but Section B, 2 out of 3 were awful. I have completed everything, but unfortunately have my concerns. Is there any possibility somebody here to post the questions from the exam as George did it?

Thanks!!

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