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ACCA AFM exam was – September 2021 Exam – Instant Poll and comments

Forums › ACCA Forums › ACCA AFM Advanced Financial Management Forums › ACCA AFM exam was – September 2021 Exam – Instant Poll and comments

  • This topic has 41 replies, 19 voices, and was last updated 11 months ago by ranganaherath.
Viewing 30 posts - 1 through 30 (of 42 total)
1 2 →
  • Author
    Posts
  • September 10, 2021 at 8:01 am #635022
    opentuition_team
    Keymaster
    • Topics: 1098
    • Replies: 1355
    • ☆☆☆☆☆

    How was your ACCA AFM September 2021 exam?

    Vote in the Instant Poll


    (Comments after 5PM UK)

    September 10, 2021 at 5:03 pm #635336
    tbm13
    • Topics: 7
    • Replies: 68
    • ☆☆

    I had the following questions:

    1) Company wants to build some construction.

    Pros and cons of using debt

    Get asset beta based on equity beta from competitors (calculate market value of debt and equity; adjust asset beta for one company 20:80).

    Calculate yield and market value of debt

    Calculate equity beta, gear

    Calculate market value of debt and equity

    Calculate WACC

    Write report (but there wasn’t much to write???)

    (I did not have to calculate NPV or APV… or did I miss that???)

    Explain why APV may be better than NPV

    Can they use securitisation on the new construction for future investment?

    2) Hotel company bought restaurant company, it’s not doing well.

    3 options:

    Shut down

    Restructure

    Sell

    Explain what MBI is

    Show balance sheet after restructuring

    Create valuation with FCF and growth model

    Talk about MBI: how much do they need to raise; what valuation

    How would company decide what to do?

    3)

    Multilateral netting: show table and cash flows

    Forward and money market: simple calculation

    Explain when to use forward contract vs money market

    What policies does company need for derivatives

    September 10, 2021 at 5:08 pm #635339
    paczi88
    • Topics: 0
    • Replies: 3
    • ☆

    sorry I duplicated my answer

    September 10, 2021 at 5:09 pm #635341
    paczi88
    • Topics: 0
    • Replies: 3
    • ☆

    Hi I had question about securitization of assets 6marks
    NPV calculate APV calculate and pros and cons
    Report

    Interest risk hedge and calculation options/ futures/ FRA
    25marks

    Synergy after merger
    Question about treasury function centralisation (company is considering foreign investment) what factors would affect centralisation
    25marks

    September 10, 2021 at 5:17 pm #635344
    shaguftahyder
    • Topics: 0
    • Replies: 17
    • ☆

    You got really nice one! I wish i had this
    Mine was difficult?

    September 10, 2021 at 5:18 pm #635345
    shaguftahyder
    • Topics: 0
    • Replies: 17
    • ☆

    @tbm 13 you got really nice paper! I wish i had this
    Mine was difficult 🙁

    September 10, 2021 at 5:20 pm #635347
    shaguftahyder
    • Topics: 0
    • Replies: 17
    • ☆

    Paczi88
    Same
    But Q3 was different

    September 10, 2021 at 5:29 pm #635351
    paczi88
    • Topics: 0
    • Replies: 3
    • ☆

    Mine was ok but chances of passing are remote second attempt…

    September 10, 2021 at 5:48 pm #635361
    japan
    • Topics: 0
    • Replies: 7
    • ☆

    What was the cost of capital and cost of equity and they mentioned rf will be the bond a ytm what was this ?

    September 10, 2021 at 5:58 pm #635367
    ranganaherath
    • Topics: 24
    • Replies: 127
    • ☆☆

    I had the same paper.

    Did you use the M&M formula to calculate the asset beta of the wind power business using the S Co cost of equity ?

    What was the APV you got?

    Also for the interest rate hedging

    What was the one which gave the best effective rate? For me it was the forwards followed the futures and then the options

    September 10, 2021 at 6:01 pm #635369
    japan
    • Topics: 0
    • Replies: 7
    • ☆

    Yes FRA give rate of 4.75 then forward 4.80 and option 4.912

    September 10, 2021 at 6:15 pm #635378
    daiem
    • Topics: 0
    • Replies: 2
    • ☆

    Q1
    -Factors to consider for debt finance compare to equity finance
    -Estimate average asset betas
    -Estimate cost of debt, cost of equity and cost of capital
    -Justifies and i think advise on estimate calculated above
    -Apv vs npv
    _Secutisation of income i think
    Q2
    Hedging payment if interest increase to 4.4%
    -FRA, futures and options and recommendation
    FRA lower and options highest
    -Value at risk for Npv
    -Centralized treasury dept
    Q3
    -Calculate expected sales and
    Impact on FS and EPS
    -Comment on directors view not to improve liquidity and to keep NCA i think
    Feasibility of selling division and if co. Agree to it something like that

    September 10, 2021 at 6:21 pm #635383
    shoban
    • Topics: 1
    • Replies: 11
    • ☆

    was unhedged better than the option for the interest rate question?

    September 10, 2021 at 6:29 pm #635386
    bhaskaravijay
    • Topics: 0
    • Replies: 3
    • ☆

    Hi i had the same set of questions. In the question 1 I don’t remember this question- Factors to consider for debt finance compare to equity finance. For how many marks it was asked?

    I think I overlooked it and might have missed it. I completed the whole paper except that one Anyways the time would not have permitted me to write that question.

    Kindly reply

    September 10, 2021 at 6:42 pm #635389
    daiem
    • Topics: 0
    • Replies: 2
    • ☆

    I think it was for 8 mrks
    Apv vs npv 6 mrks
    Discussion on estimates 6 mrks
    Estimate asset beta 7 mrks
    Ke kd and wacc 13 mrks
    Secutisation 6 mrks
    Professional mrks 4 mrks
    Can someone check if this is correct for Q1

    September 10, 2021 at 7:24 pm #635396
    pacmq
    • Topics: 0
    • Replies: 3
    • ☆

    How did you guys answer about the revised cost of equity for question 1?

    I used only the figures of Forttu Co
    I ungeared it to obtain the systematic risk and then regeared according to the required company’s MV of debt and equity to obtain equity beta of the required company. Then I computed the revised cost of equity. Anybody came up with the same solution?

    September 10, 2021 at 7:36 pm #635401
    lkleponyte
    • Topics: 0
    • Replies: 6
    • ☆

    What expiry date you used when choosing futures. I was so confused, transaction is 1st of Sep so at first at picked December’s futures then I went for September, thinking that it expires at the end of the month, leaving 1 month unexpired basis.

    September 10, 2021 at 8:05 pm #635415
    japan
    • Topics: 0
    • Replies: 7
    • ☆

    Same here one month unused basis and September future contract unused basis was 0.25*1/5= 0.05

    September 10, 2021 at 8:07 pm #635417
    japan
    • Topics: 0
    • Replies: 7
    • ☆

    I have used both competitors but i think i have done wrong

    September 10, 2021 at 8:48 pm #635430
    Luke
    • Topics: 0
    • Replies: 9
    • ☆

    You used fra 4-9 or?

    September 10, 2021 at 9:21 pm #635439
    japan
    • Topics: 0
    • Replies: 7
    • ☆

    Yes and i think it is correct and inc by 0.7 means 3.7 less 4.4 inc in libor

    September 11, 2021 at 4:39 am #635455
    tbm13
    • Topics: 7
    • Replies: 68
    • ☆☆

    @lkleponyte

    “What expiry date you used when choosing futures. I was so confused, transaction is 1st of Sep so at first at picked December’s futures then I went for September, thinking that it expires at the end of the month, leaving 1 month unexpired basis”

    That sounds correct to me.

    September 11, 2021 at 4:41 am #635456
    tbm13
    • Topics: 7
    • Replies: 68
    • ☆☆

    @pacmq

    “I used only the figures of Forttu Co”

    You had to use both companies. I think the question said 50:50 weighted (rather than by market value).

    Forttu had the complication that their business was 80% other and 20% construction. So you had to adjust the figure.

    September 11, 2021 at 4:44 am #635457
    siwela1
    • Topics: 24
    • Replies: 17
    • ☆

    Hiii did it have extra info regarding the competitor that we did NOT need to use …the info on the division which was not the scooter maker??

    September 11, 2021 at 5:17 am #635458
    ranganaherath
    • Topics: 24
    • Replies: 127
    • ☆☆

    Generally when selecting the futures or options expiry date we go with the one that’s closest to expiry after the transaction date right? So I went with September since the transaction was on the 1st of September and it said that the basis reduces to zero and expiry is at the end of the relevant month.

    For contracts I got 38

    For the premium I got around 18,000 odd and the effective rate was lowest for forward but I mentioned about the counterparty risk when giving a recommendation

    September 11, 2021 at 5:39 am #635459
    ranganaherath
    • Topics: 24
    • Replies: 127
    • ☆☆

    @siwela1

    They had info about 3 companies

    The main company Zhichi Co or something which was looking into getting into the motor scooter industry

    Liyu Co which already had the asset beta given but 60% of the business was motor scooter and 40% was wind power business

    Then S Co which was involved in wind power business. Which only had the cost of equity given and it’s debt to equity ratio of 20% to 80%

    To my approach was to find the asset beta of the wind power business using the ungeared cost of equity (Kei) using M&M 2 formula. It was a real headache finding the value when using spreadsheet and having no scrap papers to work it out.

    Then used the Kei to find ungeared beta (asset beta) using the CAPM formula and took that as the asset beta for wind power business and then used the appropriate ratio of 60% to 40% to find the asset beta of the motor scooter business. And then used the asset beta to find the cost of equity since they say Z Co is all equity financed asset beta is equal to equity beta so I assumed that and used it in the CAPM formula to find the discount rate.

    It was way too much work for 6 marks I should’ve simply assumed some figure and gone about with it. Would’ve helped me save some valuable time to spend in the last question but that is ACCA for you. Hold us up in the 1Q but it was my bad I should’ve gone with an assumption

    September 11, 2021 at 5:47 am #635463
    dee05
    • Topics: 0
    • Replies: 3
    • ☆

    The exam was fair but couldn’t even write the report,that makes me sad.
    Qsn 1 NPV APV calculation of DF using the proxy CO’s Betas which required some ungearing and apportioning the Ba per department or business unit
    Section b
    IR hedging and business valuation

    September 11, 2021 at 5:52 am #635464
    dee05
    • Topics: 0
    • Replies: 3
    • ☆

    We wrote the same exam,it was fair but time did beat me in the exam. Left the decentralization question and VAR question plus could not even finish writing the report. Part 1a question skipped it also due to insufficient time

    September 11, 2021 at 6:04 am #635465
    dee05
    • Topics: 0
    • Replies: 3
    • ☆

    Hey,did I fail to read the question? Because it wanted the discounting factor assuming that the project is all equity financed, which meant that there was no debt hence we only had to use the Ba to calculate ke ungeared.my thought

    September 11, 2021 at 11:28 am #635517
    japan
    • Topics: 0
    • Replies: 7
    • ☆

    No of contract are 35

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  • The topic ‘ACCA AFM exam was – September 2021 Exam – Instant Poll and comments’ is closed to new replies.

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