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Sir,
Regarding delta which measures the change in option value which would result from a $1 change in the value of the underlying asset, what is the “underlying asset” when it comes to hedging of foreign exchange currency with option? Is it the Contract size currency?@johnmoffat said:
The cash flows have been discounted at 9.6%, which is the ungeared cost of equity appropriate to the project.the cash flows generated in Gamala is discounted at ungeared cost of equity but the cash flows in USA is discounted at COC.. why?
Also, to calculate base case NPV, the cash flows have to be discounted at ungeared cost of equity but why is the cash flow in Tramont not discounted at ungeared cost of equity but at their own COC?
Why does the tax shield and subsidy benefit both use 20% tax rate to calculate? Is it because the fund is borrowed in Gamala that’s why it’s using Gamala’s tax rate or is it because the project is taken place in Gamala?
For the value attributable to shareholders part, why is the MV of debt included in the calculation? i’ve read your answer on a post that asked the same question as i did, you said “ if you want substract debt for both, the difference is still 128m”.
however, i tried to do it as you said,
60000×60% + 31884 + 5594 – 60000×60% – 21000(MV of E of anatra), which got me $16478…can you please explain further?Dear sir,
for the answer on the impact on SOFP, instead of separating the heading into “sales disposal” and “adjustments”, can i simply use “impact” and write down the figuress?
Sir, why is it that only Value created for VCO is calculated when the questions asks for “Chrysos Cp’s value to the equity holders”?
Dear sir,
Is the difference between the 2 total figures below called ARBITRAGE GAIN?
CMC borrows at float y+0.4% and counterparty borrows at fixed 3.8%, the total comes to y+4.2%if CMC borrows fixed at 2.2% and the other party borrows floating at y+0.8%, the total comes to y+3%
and after deducting the fees it will arrive at NET SAVING?
I’ve found the requirement. Please ignore the question i’ve just asked. Thank you 🙂
for part (a), why is the net additional cost calculated? i can’t seem to find any specific requirements for it… can i calculate the net payment and effective annual interest rate for each hedging method instead?
For the first question i asked,
if i use the first method to calculate D’11 Q2c, i’ll get the same answer.
if i use second method to calculate D’12 Q2, i’ll get an answer of 145.18 instead of 145.22.I think i’ve got it now!
Do you mind answering my second question above?
Thank you. 🙂
Sir, how do i know if i should calculate value of equity using discounted FCF – MV of debt, or using discounted FCFE?
From Dec’14 Q4b, at confidence level of 95%, the examiner uses 1.282. Can i use either 1.28 or 1.285 (which is between 0.4015 & 0.3997) instead?
Sorry, i just found the answer to that question! 🙂
Another question, on collars, there’s a loss on exercise included in the net payment. Is it correct if i think of the loss/gain on the exercise this way:
if holders of our sold call options exercise their right, we will have ‘loss on exercise’ by paying them
if we exercise our put option, we will have ‘gain on exercise’ by buying them back at lower price?
If both of the parties exercise the options: it is the net of the above two
Is it correct?Sir, why is the net payment calculation for currency option in example 3 chapter 19 and june ‘14 Q1(a) so different?
What kind of question should i apply the 2 different methods to?I did the tax allowable depreciation for Neptune in this way
Y1 : 50% x 800 = 400
Y2 : (800-400) x 40% = 160
Y3 : (800-400-160) x 40% = 96
Y4 : (800-400-160-96) x 40% = 57.6
Y5 : (800-400-160-96-57.6) = 46.4 (balancing allowance)First i subtracted it from operating cash flow and added it back to post-tax operating cash flow, which leads me to a totally different answer from the answer sheet..
My question is on the Y5 and Y6 capital allowance saving on the answer sheet, where did the figures come from?Can i have the link please? I can’t find it..
I don’t understand.. does that mean if i subtract it ‘on the face’ of the cash flow rather than working, i’ll have to add it back later?
I only learned two approaches which are : 1. subtract it and add it back method, 2. deduct tax% x TAD from post-tax operating cf. I tried the question using method 1, which leads me to a different answer from examiner..
