[Tan]

@khan20101 said:

@tan hmm i know that marks are allocated for steps.i have one more Q.i have heard from some group members that u must have to pass each and every question in optional papers.i means that a student has to pass Q1 i.e 25 marks from 50 and other two optional Q.

I don’t think it work that way, you can do whatever combination as long as it met 50.

However, doing every section does increase the chance of passing as you probably can’t assure you would get exactly 50 from section B alone.

[Tan]

@khan20101 said:

@Tan;have u attempted q3,and ur npv is negative or positive

Hi Khan, FYI my npv is positive 7xx

It could be wrong as I taken the 80m increase in working capital in R m instead of $ m.

(+)

My increase in sales is by 1.25^n which could be just multiply of 1.25.

Anyway the working will earn most of the marks so don’t worry on the final npv.

[Tan]

Also go to read technical articles numerous time until you enter the exam hall.

In June’17, there’s is already 2 related technical articles:

1)bond (15 marks)
2)Delta hedge (Delta to calculate number of put option to buy) (5marks)

AND

Basically P4 have 4 areas to cover.
1) reconstructions
2) acquisition merger
3) investment appraisal
4) risk management

Investment appraisal and risk management is something you can pre-learn, so practice many times then you will be able to do it fast in exam.

This will enable more time suppose that particular sitting involve 1) & 2) which in my opinion the question can be twist and need more time to digest.

[Tan]

@nhidza said:
if only they could allow us more time for this paper we could make it. The challenge is they put in a lot of information and calculations to make life difficult for students to pass. There is no way one could write a report and comments without calculations within such a short time. For P4 3hrs and 15mins is only supposed to be for question one (the 50 mark question). Those that pass this paper is just by mere luck or chancing. ACCA need to change the way they set this paper

I think you need improve your time management. (1.95mins / marks)

Again you need to remember, is not about to get 100% correct in each section, is about writing something in each section. You only need 50 to pass.

When I have done section B and a) in Q1, I have only 60 minutes left.

It’s clearly I will not able to complete all the requirements.

So in order to write something in every section, I just ignore some figure although I know there is something to be adjust.

I believe as long as you demonstrate the ‘direction’ (or concept), you should be able to gain most of the marks (perhaps at least 50% to earn me a pass)

Again it’s important to complete the report to earn 4 professional marks.

A good time management and preparation is key to pass.

[Tan]

@sprocker said:
Weren’t the sales given in the question for each year but prior inflation? Don’t remember the 25% increase….

I pretty sure the question wrote about 25 % increment.

The sales is given for each year, that why it create some confusion whether the 25% relate to inflation or sales quantity.

[Tan]

@taxman123 said:
my mistake,

i must have confused it with maybe costs (not in the question, but in answering your question above 😛 , because sales increased i think by inflation or 25%, cant really remember now and i confuse it with the many past papers i did).

It’s okay, man. 😉

For the sales, what I remember is increase by 25% each years(y2-y4), but did not mention to be increase with inflation.

What I did is y2 x 1.25 y3 x1.25^2 …
Not sure I am right because it could be understand as x 1.25 every each with no square.

This make my npv higher (exactly 777).

[Tan]

@taxman123 said:
no the working capital is 90m USD only in y=o. then it increased some cents per 1 USD of revenue increase and got it back in y4.

I thought the question only mentioned first year R 800 m and then increased R 90m each year.

Did the question mention the working capital is to increase according to sales?
Anyone can confirm it?

[Tan]

@jyacca said:
Q1
(A) why acquisition fail and how to ensure acquisition do not fail.
(B)(i) estimate Dharma co current value and estimate additional value created from the acquisition.
(Ii) estimate number of share exchange for the share exchange offer method.
(iii) calculate percentage gain for the cash and share exchange method
(iv) discuss the shareholders reaction and state assumption
(v) estimate cash available from operations to fund cash payment method
(vi) impact of reduction of dividend

Q2
(A) calculate the bond value when AA and when BBB
(B) Reasons credit rating was downgraded by credit agency
(C) impact of the downgrade in credit rating on the ability to raise finance

Q3
(A) investment appraisal and assumptions
(B) drawbacks of 2 transfer pricing method – 40% contribution and at cost

Q4
(A) 3 interest hedge method
(B) ???
(C) ???

Q4
(B) Advantages and drawbacks of using trade option against over the counter option
(C) Significance of delta and demonstrate how the company is going to delta hedge if the interest rate increase by 0.1%.

[Tan]

The question did mentiond the finance ministry had accouned the interest rate may drop by 0.5%

spot is -3.6+0.5 = 3.1%

As you are borrowing, you sell future now at 95.92 (not sure is it correct as i can hardly remember). Later you buy future at 96.78 (100-3.6+0.5-0.12).

In here you made a loss $ 186,750 (83 ticks x $25 x 90 contracts)

For Q1 i dont think the FCF of M is used for overall company value to ascertained synergy, but instead it is used for calculation of dividend capacity.

the additional value can be computed by using the expected value of Darma after acquisition (PEXearning) minus Current value (computed using FCF of Darma/COC and minus debt)

[Tan]

Q4 is interest rate future, option and collar, pretty simple if you practice enough.

Q3 NPV, although there are some tricky part on inflation, but I don’t think there is any issue if you have done some complex investment appraisal e.g. pilot paper 2013 Q1

Q1 a) is about the reason why acquisition fail and step to avoid it. should be no problem to most student as it is been placed at front of chapter. whereas the step to avoid i just putting up some opinion against the reason to fail.

b) test on valuation of company including synergy, synergy part is a bit tricky, I just add up the additional value allocated to Darma shareholder to current value of Darma to arrive at estimated share price they willing to pay, from there, calculte how much M need to issue to D shareholder.

afterward they ask percentage of gain in SP under cash or share exchange, which require some numbers compute earlier.

last the question ask about some dividend policy if M decide to use cash payment, where the free cash flow to equity need to be compute and comment accordingly.

overall i will say it’s fair and not much silly question in June.

[Tan]

Thank you, John.

I do agree there is no best strike price as that will be left to actual rate in future to determine.

[Author]

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