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

Although the questions was fair I stuck and couldn't attempt the questions due to keyboard and mouse issues. Keyboard was quite hard and mouse was really like real mouse. Fed up with this things. My so much hardwork and preparations have gone into vein.?

The NPV and APV qn. Do u remember the marks allocated? And the VAR qn what was the marks allocated. Do u remember

I think in Q1; Wacc (6) Npv (7) Apv (9) (10) for discussion, splitting into 5 each (4) professional marks. Q3 was, Interest Rate risk hedging, FRA, Futures, Options (15) Value at Risk (4) Centralised Treasury Dep (6)

@mtaofficial How did you approach the discount rate Q in the first question? Did you find the Kei of the wind power business to find the Asset beta of it? Or used a different approach

ranganaherath wrote:Yes 35, sorry made a typo

How did you find Kie of S without Kd? we were given cost of equity and D/E proportion only for that entity

Yes the D/E was 20% to 80% The Kd was the risk free rate 4.8%

Hey, i did it the same way, Al though i didn't use the Kei formula, i used Ba and Be , the weighted average beta was already given which was the total Ba of Zuchhi , it was like zucchi beta =0.6x + 0.4* wind power company beta, I ungeared both companies equity betas to get Ba of both companies and then we used it in the above equation to get the x (beta of motor manufacture) , It took some thinking to solve this question , but i am confident i got it correct and so did you. Also for the APV part, the tax shield discount factor had to be used from 2-5 because of one year delay, I got APV as +5 million, NPV -1 million

Effective rates for the interest risk management questions i got Fwd-4.75% futures-4.8% premium-4.91%

@ranganaherath I was very close to attempting the M&M Kie forumla on the S company as I was aware of the asset beta problem of Liyu. However, when I couldn't see their Kd, I scrapped it and decided I was wasting too much time on it and instead just plugged the Liyu asset beta in to the capm formula to get an ungeared Ke and went with that. Hope they give on or two marks out of the 6 for using capm and going with Ke

Opss I forgot to apply the delay on the tax shield. Had it in mind when reading the question but I think I forgot to apply it when doing the financing side effects part. Hopefully that wouldn't count for much. I made an assumption and stated that the issue costs were included in the loan to the total loan was 82Mil I couldn't remember seeing whether it was financed through available cash and was short of time to read the case again so just stated the assumption and went ahead with it. I got a negative 5 NPV and postive 1 APV. Opposite of yours but still the recommendation would've been the same. Let's hope for the best

I used the risk free as the cost of debt. I think it was 4.8% or something