[williams1977]

PASS – 66

Very happy. I am now an affiliate

A big thank you to the Opentuition team I could not have got through all 14 exams without the help from Opentuition.

I think I will celebrate today!

[williams1977]

@esoluyemo said:
Key differences are:

Salam Contract

i) Not standardised
ii) Not traded on Exchange
iii) Risk of default very high
iv) It is an over-the-counter transaction

I said there are no fixed contract amounts is this correct?

[williams1977]

@felixt said:
this is what I do, $7.5 is meant for us to get the MV of Nahara Co. and then 7.2 is the FCFE multiple, meaning FCFE x this multiple should equal to MV of Nahara Co. Hence, we got the FCFE. Then the question said that the combined multiple will be 7.5. Meaning that, (FCFE of Nahara Co + FCFE of Fugae co + synergy) x multiple = MV of the new combined company. To get the additional value. MV of the combined company – MV of Nahara Co originally – MV of Fugae Co (however I used 1.3x Fugae co MV instead, as this is what Acem co were requested to pay).

CMIW

but in the above you have not used gordons growth model, and it sounds like a lot of people used that way to calculate the MV of Fugae co

[williams1977]

I calculated market value of debt to be $102 (plus some cents) did anyone get the same?

[williams1977]

Can someone please clarify in Q1 the question said something like “the share price is $7.5 which is a multiple of 7.2” and they hope earnings will be a multiple of 7.5?

Was this just a red herring, false information there to mislead us

[williams1977]

can someone please let me know what answer you got for the interest rate options this is where I think I messed up

[williams1977]

oh and I valued a put option for Q1 because it was a right to sell so thats a put option right?

[williams1977]

In Q2 it said the futures basis difference was 44 points, but does this mean futures is higher or lower than LIBOR??

So if today libor was 3.8% does this mean futures today are 4.24 or 3.36??

[williams1977]

For the cashflow in Q1 was it right to discount at the Ke? I did not calculate WACC because we were given the free cashflow to equity is this right?

[williams1977]

Can somebody please tell me the main differences between futures and Salam contracts

[williams1977]

Any input would be great

Does anyone know if China recognise ACCA as a qualification? or Hong Kong?

[williams1977]

An abbreviated version of one paragraph in my Part 2 is:

-My research uses books as a data source
-Books are published and therefore more credible
-Books can be out of date as publishing takes time (limitation)
-Books are chosen by the University librarian therefore good to learn from
-The books are written by recognised scholars therefore credible

Is this what we should put in Part 2?

The example above is basically what I have done for :
Books
Internet
Journals
Financial Statements
Porters Value Chain
Porters 5 Forces

Is this right to just generically discuss advantages and limitations of sources used?

[williams1977]

HI Everyone

I am doing topic 3
An assessment of the potential impact of the Price cap on the short term lender Wonga.com

In my research I use secondary data only

PART 2 is – Information gathering and accounting / business techniques

My part 2 structure looks at:
Books
Internet
Journals
Financial Statements
Porters Value Chain
Porters 5 Forces

I take each of the above items individually and discusses the advantages and limitations of using each source of data. I do not discuss any of the data gathered just the sources themselves and therefore this section is very generic. Is this what OBU expect in Part 2?

Thank you for your help any guidance is appreciated

[williams1977]

Hello Trephena

Thank you for the advice but I think if I just explain a little more you will understand how I am using the model.

My project is on the company Wonga. There is a piece of legislation which will cap the amounts they can charge when they give out loans.

My project will analyse the operational and financial effects. I am using a Porters value chain and five forces to analyse the opertional effects. And to analyse financial effects I will value the firm using free cash flow.

The proposed legislation by the government explains that they expect the legislation to decrease Wongas revenue by 40% so using this data I am valuing the Wonga business now as it is. And then value it after the revenue had decreased by 40%

Does this approach sound OK? You say the model is not relevant but I think it is in this context?

[williams1977]

how do these groups work?

[williams1977]

Thank you so much for the help trephena

I will ensure to include something to satisfy the evaluation part

[williams1977]

which question mentioned calculating sensitivity?

[williams1977]

Q1 had this:

one company can borrow at 0.4% above base rate or 2.2% fixed rate

The other can borrow at 0.8% above base rate or 3.8% fixed rate

How does the swap work?

For the life of me I have no idea but the bank takes a cut of 20 basis points so I stuck in a calc for the fee and left it.

[williams1977]

Opentuition have tipped a consolidation of P&L but there is little to no mention of how to consolidate complex groups in the revision notes. Does anyone know why this is?

Can there be a 35 mark question on just consolidating P&Ls?
I think the examiner would struggle to create a question which is consolidating P&Ls for 35 marks. Because there is no retained earnings calc, no goodwill calc and no fair value adjustments.

[williams1977]

Thank you John, that really helps. It has been driving me nuts!

[williams1977]

How come I am getting different answers

[williams1977]

you have to calculate cost of debt. the example uses discount rates of 5% and 10%. and gives an answer of 7.51%

But when I do the calculation using rates of 5% and 15% i get an answer of 7.88%

If I try again using 4% and 13% I get an answer of 7.9%

[williams1977]

yes try the buy sell forum

[williams1977]

so how did you all find it?

I struggled on the one calculating the cost of the company using growth for the future dividends. It was like future dividends were
yr 1 zero
yr2 zero
yr3 25
then yr 3 onwards increases by 4%

How do you calculate the growth from that? !!!

There was one question where the examiner gave the current dividen in the paragraphs and then below was a table saying
2010 45
2011 56
etc

Did you all use the dividend in the paragraph in your calculations? I think this would have caught a few people out

What are your thoughts?

[williams1977]

all of it

its a new part of the syllabus so im guessing theres a good chance of it coming up

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