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it was 6 mark. The theory questions was hard. first time seen the question about creditors hierarchy
Oh yeah what did u answer for the creditors hierarchy. I got confused cuz it said descending order. I chose the first option cant remember what the order was
For hierarchy, I believe we had to sort from most prioritized to the least:
Secured debt holders
Unsecured debt holders
Preference shareholders
Ordinary shareholdersI wrote a completely irrelevant story on the importance of creditors for a business. did not know how to answer this.
There was a question on cost of discount in Sec A. Did you get same and what was your answer? I spent almost 15mins on this one.
jimagogitidze wrote:For hierarchy, I believe we had to sort from most prioritized to the least:
It wasn’t just that you also had to explain the impact on the cost of financing, ie: that the more risk (less secure) the lender faces the higher the return they require.
fayefitz wrote:Added back the 50,000 per year and did ca in full in year 1 for the machine (600,000). The npv was a huge negative so not sure how it went, it think it is only 5 marks for that part?
I got approx 48K positive NPV, did you remember to also take out the depreciation from the forecast profit?
got around 200k negative, it was mentioned in the question that depreciation was already included in given figures.
Nicolas wrote:got around 200k negative, it was mentioned in the question that depreciation was already included in given figures.
Yes that’s why you need to take it out as it’s a non CF item.
You also need to take out the amortized research costs as they are already incurred (sunk costs)
Thought that the tax savings on capital allowance netted off with the depreciation will give the taxable figure. Maybe i am confusing with TX paper.
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Yea i had no idea how to do it, so just guessed, i was trying to work it out and then thought i’ll waste time so left it. For the creditor hierarchy i said debt cheaper then equity, does this question go back to the law exam?? like for god sake. I think there is one question on relative finance costs in the kaplan exam kit which was mentioned in that question. I might check this tomorrow need a break.
Did you get the ROCE mcq question could you work it out i totally blanked on the denominator, so had to guess
I assume, we’re talking about different questions. I’ve got hierarchy question only in section A.
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Ok i made a mess of the npv question
No as far as I have understood in NPV, it is supposed to be based on cash flows and not on accounting profit.
So since the figures include depreciation, you need to take this out since it’s not a cash flow item. You do however include the capital tax allowance on the machine as this is considered as a cash item.
Generally in NPV questions this is done over many years based upon the depreciation schedule, but in this case it’s all in year one.
If someone else has a different idea do let me know.
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No i think you got it right
On Part A and B were more theory questions than calculations. I had a question for forward rates, one for forex , Miller and Orr & Baumol model.
On question 31 After I finished the exam I realised that it was a cash flow and I needed to put back the depreciation and the sunk cost ??, the 8 marks were missed. I hope to get 0.5 points for the layout and because I added the TAD for the first year. Question 32 was a standard WACC calculation, equity cost was based on DVM model ( I hope) . The hierarchy creditors I had not clue the term but I associated with the risk of the various type of finance, saying the equity is more risky, but has more return , how equity finance can be raised, etc. I don’t have a big hope for this exam because of the NPV-8 points is a big chunk that can make a difference 🙁 . Overall the exam was not hard, was tricky and drilling my brain to ensure that I understand all the concepts.struggled with SEC A theories alot . Guys what is the correct ans of these ..i want to see if i choose correct ans
I dont remember alot but some of the ques were1.What role would money market have in LC arrangement?
a)issuing of bankers acceptances
b)initial arrangement of lc
c)acceptance of LC
d)discounting the banker’s acceptance2.Function of stock maket?
a)smooth share price fluctuaations
b)facilitate trading of commercial paper of public companies
c)determine fair price for assets
d)facilitate trading of issued shares of public company3.Two value for money objective for Not for profit orgnization
a)reduce administrative expn
b)publish financial results to attract more funds
c)increase tution fees
d)investing in information tech to provide facilities for more students4.according to interest rate parity theory which two (sec B que)
a)increase in dollor proceeds from euro invoice
b)compensatory increase in dollar inflation rate
c)devaluation of dollar in relation to the euro
d)opportunities to make arbitrage gains on foreign exchange transaction5.disadvantage of currency future contract (sec B ) i forgot the number options but these were the points
a)contract may not exactly match the transaction being hedged
b)future contract has to be exercised on a specific date
c)outcome f currency future hedge not precisely known due to basic risk
d)contract is inflexible & doesnot allow hedging company to take advantage of favourable exchange rate movement6.not an element of Working capital
a)trade credit
b)cash
c)sales
d)inventoryAm not sure but normally the tax savings capital allowance is available against depreciated assets. Taking out the depreciation means there should be tax savings on capital allowance
Fayefitz
Why added back research and development.to me it is sunk cost not incremental.To me only depreciation needs to be added back in profit to reach cash flows.not sure I am right or notques no 2 we had to choose two options same goes with que no 5 there was 1&2,1-2-3,1–2-3-4, neither similar pattern
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Hi syed, i made a mess of the npv question
LOL, was thinking the same. it must be Thanos, its like they dont want us to get them right
Depreciation needs to be added back in accounting profits to get cash flows.is not it?
Did anyone get the current market value of convertible debt question for some $2.50 per share growing at 6% and the redemption value of the shares after conversion was less than the nominal value of the bond? They asked for the current market value so I’m assuming it should be based on the nominal value of the bond at redemption since it’s higher right? Moreover I couldn’t find the figure based on the conversion value amongst the options.
Also there was one question regarding the WACC and cost of debt graph with tax, i took the graph with the straight downward sloping WACC curve, not sure if that was correct though. I must say the MCQ’s kind of sucked.
Also does anyone know the answer for the behavioral finance question regarding the informed investors contributing to the stock marker bubble being true or false and the uninformed investors making irrational decisions?
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