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@aadjazz said:
In Section C, Q32, NPV Question, it stated that investment as well as WC was at the beginning of the first year of operations so I understood that should go to YR1 instead of YR0, anyone with the same?I didn’t do it this way, as cash flows that arise at the start of the year should go to Yr0. Only cash flows at the end of the year should go to Yr1.
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I can see I just made a silly assumption!
@trevon2020 said:
The EOQ questions (A) asked about whether the company sold take the settlement discount offer by the suppliers……why did they give the company credit sales?That was a ‘distractor’ and unrelated to part A. But i did use that to calculate interest costs and bad debts for part C
@carolita1 said:
What was the mcq correct answer for the market value of the 3 % convertible loan note?I coudnt get it.It was the $77 answer, which was the cash option rather than the conversion option
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I seem to remember the convertible option was better than the cash, $114 vs $100?
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The EOQ saving, do you remember the numbers behind it?
@aadjazz said:
I seem to remember the convertible option was better than the cash, $114 vs $100?I got conversion value of $114 too and so conversion will be likely.
Just wanted to make sure I didon’t misread the question cos I did that for question A….it was a really tricky questions though
yes i wAS wondering WHY my NPV was so large. I as wondering if i did something wrong mine as 13 mil but i only realised the scrap value at the end so my end figure would be wrong
When you inflated the value of the shares did you then also discount using the cost of capital %? The conversion would occur in 5 years time so should’ve been discounted by 5 years.
@accastudent1986 said:
When you inflated the value of the shares did you then also discount using the cost of capital %? The conversion would occur in 5 years time so should’ve been discounted by 5 years.I don’t think you need to discount them since the redeemable value in 5 years time is the nominal value. The values can therefore be directly compared
Correct answer is money market hegde lol
Because you can’t hedge interest rates and you can only hedge interest payments etc.
So curreny futures, options and forward agreement will hegde interest rate issues@complicated said:
I don’t think you need to discount them since the redeemable value in 5 years time is the nominal value. The values can therefore be directly comparedBut 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
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@accastudent1986 said:
When you inflated the value of the shares did you then also discount using the cost of capital %? The conversion would occur in 5 years time so should’ve been discounted by 5 years.Yes, and so the $100 nominal as both will happen in the future.
Basically what I’ve done was comparing $100 nominal conversion in the future vs value of the shares in the future (around $114), as value of the shares in future will be higher, the will convert at that point, so took that figure and then discount it as part of the whole calculation to bring it to today’s money terms. I hope it makes sense.
Hi hope all well did any one remember anything about MCQ my most answer were C does any one have same? Section B and C were fine speculation part C but part A was really tricky
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@accastudent1986 said:
and it said repayment option would be at par and not the conversion optionreally? I don’t remember that bit, it would seem quite silly considering the conversion option was better in terms of value though.
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
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