*** ACCA F9 March 2018 Exam was.. Instant Poll and comments ***

Yeh I think with money market hedge the cost was 1907 something. And with the forward rate for shillings I thinku had to use interest rate parity. I used the deposit rates for shilling and dollar and Exponented the fraction on 0.25 power for 3 months. I got 14.11 as fwd rate. Anyone else got these answers?
Any one knows what rates to use for interest rate parity? Deposit or borrow?

The exam was a totally unexpected one. I sat there and it took me a good 5 mins to accept the fact that the examiner screwed with us LOL. I started with section A and B and spent a good hour answering what I could and moving on to section C.

Q31
Equity Vs Business Finance.

Calculated the Theretical ex rights by calculating how many new shares had been issued 2500/5 = 500 new shares. This making total number of shares 3000. Calculated market values by multiplying 2500 * EX DIV PRICE and 500 * discounted price. Divided MV by number of shares to get theoretical ex rights of if I remember correctly somewhere between 4.60 and 4.70.

Moving on, calculated the Eps which was basically Profit after tax over number of shares. For equity, the number of shares increased giving EPS OF 0.33 and for debt finance, interest increased this affecting Profit after tax and giving an EPS of 0.35.

The new share price was simply PE RATIO that was given multiplied by EPS. I guessed this as I remembered doing this in a past paper.

In terms of which is better, I used the debt equity ratio and also spoke about other non financial matters.

For Islamic Finance, I spoke about Mudharaba as a alternative to equity and Sukuk for loan notes.

Q32

Multiplied the probabilities by the cash flows for each year. Multiplied by discount factor. Compared NPV to investment to see if it was financially acceptable. I got a positive result, so accepted investment.

Struggled with part where it asked about NPV being zero. Didn’t spend too much time on it as it was only 1 mark.

For highest probability, basically selected 0.5 from year 1 and 0.6 in year 2.

The last part required you to talk about
only TWO of the 3 mentioned concepts.

I selected simulation and spoke about how such methods are used in times of uncertainty in assisting to forcecast. Etc gave some advantages/ disadvantages.

Lastly, spoke about risk adjusted discount rates where I mainly spoke about CAPM and specific discount rates talking through the whole process of ungearing and regearing.

PLEASE LET ME KNOW YOUR THOUGHTS.

Fingers crossed for a pass 🙂

Sounds different

@lukman94 said:

Q31
Equity Vs Business Finance.

Calculated the Theretical ex rights by calculating how many new shares had been issued 2500/5 = 500 new shares. This making total number of shares 3000. Calculated market values by multiplying 2500 * EX DIV PRICE and 500 * discounted price. Divided MV by number of shares to get theoretical ex rights of if I remember correctly somewhere between 4.60 and 4.70.

Moving on, calculated the Eps which was basically Profit after tax over number of shares. For equity, the number of shares increased giving EPS OF 0.33 and for debt finance, interest increased this affecting Profit after tax and giving an EPS of 0.35.

The new share price was simply PE RATIO that was given multiplied by EPS. I guessed this as I remembered doing this in a past paper.

In terms of which is better, I used the debt equity ratio and also spoke about other non financial matters.

For Islamic Finance, I spoke about Mudharaba as a alternative to equity and Sukuk for loan notes.

Q32

Multiplied the probabilities by the cash flows for each year. Multiplied by discount factor. Compared NPV to investment to see if it was financially acceptable. I got a positive result, so accepted investment.

Fingers crossed for a pass 🙂

I got price as 4.83 for the issue price but can’t remember how I calculated it. I also got 414 new shares byt I think mine was wrong.

Also got positive Npv so accepted. But I recalculate my PE ratio again can’t remember how but the one they gave was an average for other companies I thought but not sure now.

I’m a little worried now. Can’t face studying this again

@lukman94 said:
The exam was a totally unexpected one. I sat there and it took me a good 5 mins to accept the fact that the examiner screwed with us LOL. I started with section A and B and spent a good hour answering what I could and moving on to section C.

Q31
Equity Vs Business Finance.

Calculated the Theretical ex rights by calculating how many new shares had been issued 2500/5 = 500 new shares. This making total number of shares 3000. Calculated market values by multiplying 2500 * EX DIV PRICE and 500 * discounted price. Divided MV by number of shares to get theoretical ex rights of if I remember correctly somewhere between 4.60 and 4.70.

Moving on, calculated the Eps which was basically Profit after tax over number of shares. For equity, the number of shares increased giving EPS OF 0.33 and for debt finance, interest increased this affecting Profit after tax and giving an EPS of 0.35.

The new share price was simply PE RATIO that was given multiplied by EPS. I guessed this as I remembered doing this in a past paper.

In terms of which is better, I used the debt equity ratio and also spoke about other non financial matters.

For Islamic Finance, I spoke about Mudharaba as a alternative to equity and Sukuk for loan notes.

Q32

Multiplied the probabilities by the cash flows for each year. Multiplied by discount factor. Compared NPV to investment to see if it was financially acceptable. I got a positive result, so accepted investment.

Struggled with part where it asked about NPV being zero. Didn’t spend too much time on it as it was only 1 mark.

For highest probability, basically selected 0.5 from year 1 and 0.6 in year 2.

The last part required you to talk about
only TWO of the 3 mentioned concepts.

I selected simulation and spoke about how such methods are used in times of uncertainty in assisting to forcecast. Etc gave some advantages/ disadvantages.

Lastly, spoke about risk adjusted discount rates where I mainly spoke about CAPM and specific discount rates talking through the whole process of ungearing and regearing.

PLEASE LET ME KNOW YOUR THOUGHTS.

Fingers crossed for a pass 🙂

TERP Was same. But I got EPS of around .41 and .45, as the earnings had to be after expansion. Recalculated the earnings divided by new no. of shares based on equity or debt finance. For last bit, I compared the debt equity ratio with the industry standards and commented on what could be better with either options. Even i wrote sukuk and mudarhba..could only rem those two.

How did you answer Q32 @SONAL ?

How about the market value of debt mcq. The nominal was 100. 5/100 interest and redeemed at par plus 10 percent premium. Tax was 20%
Did anyone deduct tax from interest?
What was ure MV?

The 2010 question is not really the same thing. It is on joint probability, just not on investment appraisal. What I have learnt from this exam is that you really have to 1. Know the syllabus inside out 2. Don’t rely on past papers/ revision kit 3. ACCA are a company who need resits to keep making profits!!

But u need to consider earnings after expansion too. Sales would change, tax amount would change. In case if debt sales, interest and tax would change. That’s why eps would be diff than current. As well as for debt n equity

@studyfreaksy said:
For the EPS, did u increase the pbit? It said that with either source of finance, the 2m expansion would result in an increase in PBIT by 20 % my new Pbit in both cases was 1916.4.
(1597/100 x 120)

I used that as a starting figure for both debt n equity funded expansion.

Then with equity i recalculated PAT, keeping the interest of 315 as same and applying 22 % on PBT. Then calculated PAT. EPS = revised PAT / 3000 shares

For debt I took 1916.4 as PBIT, subtracted interest of 475 (315 plus 160) calculated new PAT and divided on existing shares (2500) to arrive at the new EPS.

got a better EPS with debt. But debt/equity ratio messed up so in analysis part I wrote to choose equity as it results in a reasonable debt/equity ratio.

I got same figures. Hoping I did enough to secure a pass.

You’ll only lose 1 mark. The remaining will be marked with that mistake taken into account.

Hi for q31, we can go either ways about it right with or without the 20% increase, because that will reflect at the end of next year, if we do the expansion at the beginning, same profits remain for higher capital ratio, they just stated after expansion, so it isn’t clear whether they were referring to immediately or after a 20% hike.

Just my opinion, I had worked it out originally with the 20% hike but then the Market price would be affected, because a year down the lane the whole impact of rights issue is wiped off i.e loss in market value immediately after expansion is lost, which made me rework with existing profits.

Just my thoughts. Hope I get some marks for it.

I think this is the hardest paper ever? Some of the MCQs have matching answers and very difficult to pick right one even with good conceptual study.
In section C cost of capital the big part of syllabus was almost ignored even the weighted in MCQs was about 4 to 6 marks. What makes things more disaster is investment appraisal question on joint probabilities…. almost 14 marks revolve around joint probabilities in sub parts of the question. Simulation is a broader term I focued on sensitivity analysis to answer this part and changing/varying project cash flows to try to answer simulation. I am not expert but adjusted discount factor is P4 stuff? F9 is more focused adjustment for business risk….asset beta gear and de-gear question.
We will wait for tutors comments….???