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I got WACC around 10.8%. NPV around 1189 it’s called tax benefit when calculating depreciation charge. If there was no tax payable in year 1 therefore there couldn’t have been any tax benefit. I calculated in a usual way. In money market hedge question I didn’t mix euro with dollars and dinars. The home currency was dollar, the question stated, money market hedge, so I only used dollars and dinars for my calculation. I didn’t look too much into other parts od currency exchange chapter but when you exchange dinars to euro to pay euro supplier and your home currency is dollar isn’t it called netting? I am not sure I hope my answer was right.
@gtavicecity said:
There was another mcq and I chose government interferes to change exchange rate. any ideas on this?I know government uses monetary policy and changes interest rates but dont think it directly changes exchange rates so chose a different answer.
But was the question not what was the value for receipt in dinars using the money marked hedge?
@dreamerSK 11 marks I think
@monluka said:
But was the question not what was the value for receipt in dinars using the money marked hedge?Think that was a different question. I didnt notice the interest rates were for 6 month already so you didnt have to divide by 2.
How about rights issue and capital rationing. Does anyone remember the marks?
@trishee said:
Rights issue 5 and capital rationing 4Thanks. I am hoping for high marks in Q31 because I think i messed up 32.
I would have not included fixed costs because it was not an increase in fixed costs so the project just results in economies of scale. I didnt adjust for tax in arrears and tax savings to put the figures in correct years.
I added the NPV wrong.
It is so hard to judge g
how many marks i can get for 32.Hi all,
This is my stance on question 32.
1. The tax allowable depreciation should be calculated as normal, but then all of the tax allowance should be recognized in year 1. The justification for this comes from F6 knowledge, and I had solved a question in BPP kit with the same trick.
The fixed cost should have been deducted from contribution, otherwise how would you charge corporation tax (certainly not on contribution)
2. The probability index calculation is simply NPV/ initial investment.
what was the answer to money market instrumnt one? was it treasury bills? and also the fwrd rate . i got 1.62. any one els got this answr???
@bandhi said:
I believe you were suppose to have used Gordons growth model. So payout was 55% and ROCE was 20% therefore 0.45×0.20= 0.09, 45% being the retained earnings, and from there you just applied 0.45*1.09/2.45+0.09 = … or something along those lines, but I might be wrong.is payout was given? I can’t remember it was… or you calculated it by yourself?
@simchester said:
F9 was fair…hope to passif so maybe you can you tell please the way you calculated the first question concerning money market hedge
Many thanks.@mira93 said:
what was the answer to money market instrumnt one? was it treasury bills? and also the fwrd rate . i got 1.62. any one els got this answr???Do you remember how you calculated the forward rate and do you remember the question for money market and other answers?
does anybody remember this question from the MCQ, where you had to calculate the ROCe using average investment method. Monthly profit was $729000 and the total investment in the beginning of hte project was 1800000. I tried to do this: 729/(1800/2). But it didnt match with any of the given choices.
I can’t seem to quote! Anyway, the money market instrument was commercial paper which are only used by large companies (the co. in the question was one!) Treasury bills are used by the government
@vebem said:
if so maybe you can you tell please the way you calculated the first question concerning money market hedge
Many thanks.Can’t remember numbers but 1st I think was asking money market hedge:
Steps
1. Borrow funds in currency which you need the money
2.Translate-exchange the funds today
3.Deposit the funds in the currency which you eventually want the funds until…I think that was 6 months@simchester said:
Can’t remember numbers but 1st I think was asking money market hedge:Steps
1. Borrow funds in currency which you need the money
2.Translate-exchange the funds today
3.Deposit the funds in the currency which you eventually want the funds until…I think that was 6 monthsyes, exactly, i was sure in monye market hedge and did all of these steps but my answer didn’t match with any of the given choices that is why I asked you…
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@karinaq said:
does anybody remember this question from the MCQ, where you had to calculate the ROCe using average investment method. Monthly profit was $729000 and the total investment in the beginning of hte project was 1800000. I tried to do this: 729/(1800/2). But it didnt match with any of the given choices.you forgot about depreciation that was 1800/4=450
729-450/900= 31%
This is what i think@karinaq said:
does anybody remember this question from the MCQ, where you had to calculate the ROCe using average investment method. Monthly profit was $729000 and the total investment in the beginning of hte project was 1800000. I tried to do this: 729/(1800/2). But it didnt match with any of the given choices.I think you had to say 1800 000/4 (Depreciation per year for 4 years) which gives 450 000 then say (729 000 – 450 000)/(1800 000/2)
The money market hedge question led me to nowhere because I couldn’t arrive to the listed options. I know this topic very well and I don’t understand where I was wrong. I had an answer close to $205,… which wasn’t there at all. Again ended up guessing, and as far as I can see in the above posts I made wrong guess …
Here is what went wrong for you with market hedge(went wrong to me too the same way, but I managed to get the figure when I read more carefully): you adjusted deposit rate for six months, thinking this was yearly rate…it is not… deposit rates were already given for six months period… cannot remember for borrow rate though…
@mira93 said:
what was the answer to money market instrumnt one? was it treasury bills? and also the fwrd rate . i got 1.62. any one els got this answr???What were the other options? I remember reading something about short-term in the question so I didn’t know which to choose between commercial paper and the other “borrowing” answer. I think that was the question about funding a short term deficit that is expected in the future.
On the MCQ Market Hedge question I calculated this multiple times in the exam and kept coming back to an answer that didn’t exist. In the end I chose the answer closest, however my answer was pretty much midway between answer C & D (if I remember rightly.) I still don’t know what I was doing wrong as it was an area I felt confident in.
@marmil86 said:
The money market hedge question led me to nowhere because I couldn’t arrive to the listed options. I know this topic very well and I don’t understand where I was wrong. I had an answer close to $205,… which wasn’t there at all. Again ended up guessing, and as far as I can see in the above posts I made wrong guess …Here is what went wrong for you with market hedge(went wrong to me too the same way, but I managed to get the figure when I read more carefully): you adjusted deposit rate for six months, thinking this was yearly rate…it is not… deposit rates were already given for six months period… cannot remember for borrow rate though…
Thank you very much I really didn’t notice that deposit rate were given for 6 month:(((
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