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I thought it was a challenging paper. Feel like 50/50 chance of passing.
Had a hard time with the question where the cashflows where 20% chance this and 15% chance that. Never seen anything like it. So guessed that one. The rest i feel confident but just barely.What did everyone put for the advantages of convertible loan notes?
Also what did everyone put for critising the director view?
Thanks
I wasn’t sure on that so I done the 15+20+65 and added them together…. not sure it’s right.
I Just rambled something about, lower risk thus lower rate of return. Chances for shares instead of cash and tax relief. Directro view Q32? I Put the 2 year maximum is too short. But no study ground for any of that
Criticism – using 4 years for all the projects, using 0.5% salvage value for all the investments and using target payback of 2 years which might be too low.
Absolutely hate MCQ section !! Much prefer the 20 mark questions , I find them difficult to grasp especially the ones that ask “which one of the statements are correct ” !! Does any one else find them a problem ? 60% of paper is a lot of marks to guess ?
Sir John Moffat was the key to this exam. More than 50% was business finance and valuations
I hate them? I’ve sat this paper 3 times now…. getting 49 on each…. first time I sat the paper it was all written but now it’s mcq they are all there to trip u up…. its just luck on the day ??
I really didn’t know what to put….I put tax relief, the conversion option to allow to alter cap struct and couldn’t think of a third one??
Me to. 11 something positive. I dont know why but i used the nominal percentage 12% for discounting. Hope I was right
I included scrap but I’m sure mine was 11.4m…. either way will only be worth half a mark..
I think I used 12% too…. the after tax cost capital…. either way it will be half a mark and we will still get half mark for the NPV total…
Any one remembers the wacc ? What did you use for $3m bank loan % since it was variable interest ? advantages of convertible loan 1) tax relief in interest rate 2) since it is debt nor equite cheaper as less risk 3) convertable to shares the company wont have to pay any cash to the loan owners
I got so confused by the bank loan in the wacc question.How did everyone treat that?
I also got confused about the treatment of the bank loan when I saw variable interest rate…
The section A questions were way too hard the way I see it. But the section c was still quite ok.
There was a question on value for money.. Regarding inputs and out put.. I chose economy for input and effectiveness for output.
there was also an mcq on wacc.. I didn’t even understand how to deal with it!! With some irredemable being issued at 3% discount to nominal
For the npv did anyone else inflate each year by 5% & 3%?
The fc were incremental so should been left as they were as there was no other details? Is that right??:-/
I still think BPP and Kaplan needs to increase the difficulty level of those MCQs in the revision Kits.
The exam mcqs were tougher than anything I’d seen in either of the kits.
For the convertible loan notes my advantages were:
1. Cheaper than equity because of tax relief.
2. No issues with ownership/control as the debt is easily accessible.
3. It will reduce the overall WACCReally not sure about this exam. I also got 3 mill something for the NPV and included the scrap value in my calculations.
Had payback period as being 3.4 years.
For the choice of both NPV and Payback period I put:
NPV looks at whole life of the project and includes the cost of capital.
With a positive NPV it means the investment is financially acceptable. I also put that using NPV gives an actual figure that the directors can use to compare with targets and also lets them know by how much their market value will increase.The discounted payback period I put also includes cost of capital. I also put that it allows the directors to see when the initial cost of the investment will be paid back. So in this way, it will help them manage their future cash flows. I also commented that the earlier the payback period is the better and said the discounted payback period doesn’t really account for the whole life of the project. Just because a payback period may be sooner doesn’t mean the whole investment is worthwhile. However as they have combined it with the NPV that would allow them to view the return over the whole life.
MCQs were soo tricky though. I guessed about half so I’m really not sure about this paper 🙁
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