FM*** ACCA F9 September 2016 Exam was.. Instant Poll and comments ***

Overall it was not bad. The multiple choice questions were trickyyyyyyyyyyyy

Can anyone tell me the right answer for one question on four equivalence theory??....the mcq question

Section C was fine for me. The discount got $2000 benefit, the EOQ was 8280. Got about 11m in my NPV. the capm was on ungearing and regearing the asset beta. Section B of 21-25 the business valuation question was cool. Section A was tricky. Keeping fingers crossed

My NPV was $11,984,000.

hi everyone, for the EOQ question i first calculated TAC without EOQ and then calculated the EOQ and then calculated the TAC again. finally compared with each other. cant remember which one was better though probably first TAC.

hey i like to share what i did on the last 2 structured questions 31.a.Indicated what will you save if you were given the early settlement discount by suppliers{therefore i focused on payable days and purchases from the supplies instead of receivable and sales since it is given by suppliers and not give by us .i believed acca put sales 1st to confuse you if you didnt read it carefully} i used the purchases from the suppliers which was $1.5 the og payable period was 60days {current payable would be 60/360*1.5} $250,000 revised payables days {if we pay within the new days offer we will pay}30/360*1.5=$125,000 change in the payable{the amount we owe}250 000-125 000 = 125 000 change in finance cost based on the change in receivables 125 000* 4%= $5 000 the administration cost would increase $500 which will reduce savings =(500) the discount given was 0.5% which will be 0.005 * 1.5m=7500 we will save on purchase if discount was given total saving if we're given discount by supplies ie on purchases we will save =12 000 [5000-500+7500] b. i got around the 8281{can't remember but it was some way around there} c. help with receivable 1.credit control 2.credit analysis receivables collection

For the NPV i got between 10m-11m The benefit of using CAPM is it reflects the required return on investment along with a risk of premium of the entire project. such risk include the business and financial risks such as business structure and capital structure of the firm given that the risk remain unchanged. This method is more certain than the DCF .Since the DCF based on forecast ed sales and production units this risk a high degree of uncertainty and also it shows that inflation rate is fixed when in reality the inflation rate varies based on economic conditions.

@kerdesha said: change in finance cost based on the change in receivables 125 000* 4%= $5 000 the administration cost would increase $500 which will reduce savings =(500) the discount given was 0.5% which will be 0.005 * 1.5m=7500 we will save on purchase if discount was given total saving if we're given discount by supplies ie on purchases we will save =12 000 [5000-500+7500]

If you pay your A/P faster, it means your working capital will increase and therefore your overdraft will increase. Therefore, 5000 is a cost, not a benefit. It has to be 7500 + (5000) + (500) = 2000

Section A: I found it difficult. Some questions were quite ambiguous. Also, while some were very easy (took me a second to decide) some took quite a while to calculate (certainly more than the 1.8 minute I had)... but you get 2 points each. In previous papers, you'd get some marks for your workings, even if the result was wrong. With the new MCQ, this is no longer the case. I think this is a problem, in particular in section B where a lot of the calculations involve several steps. EOQ: $2,400,000 components, $5 each, so a total of 480,000 components per year. (I think the wording was a bit ambiguous because it wasn't 100% clear whether the order & storage cost were part of the figure. But I think they said components and this is the only way that makes sense... still, could have been clearer) Current: 1 order per month, so 12 per year. 480,000 / 12 = 40,000 for each order. Order cost: 12 * 248.44 = 2981.28 Storage cost: Average (40,000/2) * 1.06 = 21200 Total: 24181.28 EOQ: sqrt(2*480,000*248.44/1.06) = 15000 480,000 / 15,000 = 32 orders Order cost: 32 * 248.44 = 7950.08 Storage cost = 15,000/2 * 1.06 = 7950.00 Total: 15900.08 EOQ is better (saving of 8281.20). EOQ should be adopted. Notes: 1) Maybe they can negotiate trade discount for placing big orders? 2) I made the calculation as above but I wonder if a real-life calculation would also have looked at changes in working capital. I think it would have been nice for the paper to say that working capital changes can be ignored. (Or does average working capital not change in this example and I'm just confused, hmm)

I found the CAPM question really hard because CAPM was never used to make investment decisions in the guide I read (not OpenTuition I'm afraid). It was really about financing (cost of finance) and risk. But probably I just didn't get CAPM at all...

oh yeah ! lol my bad...thank for bringing it to my attention @tbm 13

In NPV calculation, for year 5 did anyone use it for putting any kind of amount?

@accastudent1986 said: But the question stated that the market value of the shares were $3.6 each and would grow by 4% per year for 5 years. Therefore the future value would be $3.6 x 1.04^5 but the question requested the current value so you should discount the future value

Sorry I don't get it. Did you discount only the conversion value or both of them? If like what you said the question asked for the current value, $100 would be a future value as well.

@mpi9 said: In NPV calculation, for year 5 did anyone use it for putting any kind of amount?

I did not, tax was not paid in arrears, maybe the wording of the sentence was weird but that was how I read it,,

@arun12345 said: Can anyone tell me the right answer for one question on four equivalence theory??....the mcq question

I said options 1 & 2 were correct (used interest rate parity and purchasing rate parity) but option 3...:( I said that was wrong. Tried deflating the nominal interest rates and found out that real interest rates for X and Y were exactly the same. And thought of how four way equivalence theory has stated that relative interest rates= relative inflation rates. My answer may be wrong. What did you answer?

@complicated said: I did not, tax was not paid in arrears, maybe the wording of the sentence was weird but that was how I read it,,

Right...me neither. Just i saw that everyone got around 10-11m NPV. Me some less around 9. Something should be good however :)

Even I did the same buddy.... I got both the rates to be the same.... Even I opted for 1&2

Hi evy one can any one please answer that mostly of my multiple choice answer were Option C did any one have same result of mostly Multiple choice with option C or I am wrong ?Just want to confirm as F9 made me tired lol

For the npv qn was the tax paid in arrears o in the same year???

@arun12345 said: For the npv qn was the tax paid in arrears o in the same year???

Tax paid in the same year, it stated that tax liabilities were settled in the year it took place.

CAPM can be used. Do you remember the regearing and gearing formula? (Asset Beta Function) Well since, that company was moving to a new sector They would use the asset beta function to find out the new Equity Beta for that particular sector. So basically, they would have an accurate estimate of Equity beta and hence also the Cost of Equity which will basically give an overall accurate estimate of the WACC.

in 31b i got something like 81210 the higher cost of current ordering policy than EOQ. is it correct?

There is a high spread in the difficulty of those MCQs. Some are (too) easy and some are mad... I studied well Basis Risk for exemple and I am able to explain the concept in details. But still, I could not answer the exam question. And still now, with my BPP book open, I canno't answer the question. Very frustrating.

I did that same mistake. Phew I am not the only one. We will lose probably only 2 marks for that

Q 31 NPV was positive around 11 000. Working capital at end of year 4 was positive to receive back initial investment (yr 1 1, 500*1.06, year 2 90*1.6*1.6, so on). Tax to be paid in yr 1,2,3,4 no in arrears very straigtforward. 250 capital allowance was in year 4. NPV is positive around 11,000 ans stated that project acceptance might be affected if the estimates are correctly calculated. For written part Q32 b) just stated CAPM formula and said that if the CAPM rate was less than 12% (disc factor in Q32) then NPV woud be higher to affect the project. Q 32 EOQ was for 13, 487 units. Ordering cost was too high 13,487/2*248=1 672 388 somenthing like that . Forgotten how to find holding costs. Put the holding costs as 1 672 388 just number without formula how to derive that number. As EOQ costs was bigger than 2.5 mln in question did not recommend to go for it. Not sure I am right.

My answer sheet wasn't compatible with the question paper. There was no way of indication which section c questions I answered. Just wanted to also confirm if the EOQ question, in addition to the COh and COo if it also required us to use the average deposits for the finance charge ?

Hi evy one still waiting for reply as asked that did any one have experience of having answer C of multiple choice question as I had mostly answer C ??????

@dskinner83 said: I didn't include the finance charge in the EOQ calculation, I don't think I'd ever seen a EOQ question in practice where the finance charge was part of the workings. I could be wrong though, I just never even considered including it. I just included purchase costs, holding costs and ordering costs. I got the costs with EOQ to be cheaper than current method, so advise using EOQ.

Yeah, Deborah, I got the same. It was similar to one of the questions in the exam kit and the method was as you stated. I think EOQ was 15000 Iirc.

For the EOQ question, isn't stating purchase cost irrelevant, because it will be the same regardless how we order. So it is necessary to look at holding and ordering costs?

@suf23 said: For the EOQ question, isn't stating purchase cost irrelevant, because it will be the same regardless how we order. So it is necessary to look at holding and ordering costs?

Won't make a difference as the saving should be the same either way, can't remember what was asked, in an exam kit they did all three, but the saving should be same either way.