*** ACCA P4 December 2017 Exam was.. Instant Poll and comments ***

My last ACCA exam and by far the hardest I have done so far.

Question 1 being on corporate reconstruction threw me, I was so unsure about adjusting the coupon rate and the new value of the bonds…

Then the Macauley duration part?

I ended up doing questions 2 & 4 then coming back to 1 to avoid sitting in the exam panicking the whole way through.

Q1 was laughable…. a very tough question.

I did Q2 MIRR, IRR, VaR + RA WACC, not too bad on that.

Q3 a straight financial analysis – ratios and comments, not expected at P4, wasn’t as technical as expected.

But that Q1 ooooffff a shocker 🙂

Q1 The hardest toughest question in the paper I feel

Q4 Even the forex is also bit tough

Q2 NPV was far better question

RAWACC aproximately 12 %

Q1 a. Takover bid i think
Q1 b. Yield Curve Bond Valuation
Q1 c. Duration after calculating b
Q1 d. Balance Sheet
Q1 e. Writing on the basis of a,b,c,d WOW all went wrong from point b onward

did some calculations only guess…..

Q2. NPV, IRR, MIRR, VAR, WACC + writing again WOW
Q3. Ratios + writing

All that in 3 hours out of which spend 60m reading to question paper

Q1 seemed quite unbalance for 6 mark to calculate Macaulay for bonds with coupon and for bonds/loan amortizing for 5 yrs (too much time to do the CF of interest on amortizing loan) – interest and equal installments, I wonder what was they wanted to test, if you know the model you know it for coupon and amortizing.
For an expert level I thought they would like to test our capability of providing strategic advice but instead I crushed my brains and my fingers on number crunching…while only residual time was spent on interpreting the figures (not that I was not capable on analyzing but did not have time to do that especially in Q1 – attempt lastly.
Overall I did not find the exam intellectually challenging, it was quite easy. Here is the summary how I remember
Q1: lightly leveraged company that undergoes 2 potential projects both involving borrowing EUR 1245 mio (figure might be dif but size is correct) 5 yrs to either
buy shares (traded at USD11 per share) and then cancel them off or invest in a venture, to calculate the existing bond (5,2 coupon 3 yrs) current value considering that the external rating will fall from A to BBB due to borrowing and post tax cost of capital 12%, then to calculate the new bond coupon/yield considering the the current gov yld and margins all 6m
Then for 6 m Macaulay for new bond with coupon and amortizing for 6 marks;
Impact on FS, EPS and Gearing of the two scenarios for 11 marks
Impact of the above issues on company, shareholders, equity holders..etc for 16 points
Appraisal of one of directors intention to increase borrowings as a takeover defense and for tax saving – 6 points.
Q2 calculation against a given target of NPV, IRR, MIRR, VAT 97,5 confidence level and comments on how these models are considering risks, 25 marks
Q3 Pure ration analysis, B/S an P/L given, dividends, share price and for 20 marks analysis. It was supermarket chain ranked 3rd into the market and also requesting to indicate what are the other info needed for completing the analysis, all of this for 3 ys
For 5 marks to indicate what are the main sources of finance available for this co (the cash increased in the past 3 yr).
Too time pressure exam all in all.
Cross fingers for you guys, I hope we pass!

Disaster! There was a massive traffic jam on my way there so arrived 20 mins late and panicking. Q1 was very confusing – I thought mark allocation vs time was terrible. I did q4 and then started q3 with 15 mins to go. I’ll definitely be rewriting in March but good luck to everyone ?

I got a NPV of 3,018. Clearly I did something very wrong

@cm69170 said:
I had exactly the same $1170 NPV – accept the project.
IRR was 0.5% under the required – shouldn’t matter because IRR is not an absolute measure of return.
MIRR was 0.5% greater than required and is a much more accurate measure than IRR – accept the project

Im glad someone else got these answers 🙂

Question 1 was a real shocker got the same answers for question 2

How did you guys arrive at this figure?

What did you do for the year 1 and year 2 tax losses? Did you add back the tax credit on the cash flows?

Did you add it back as a tax credit so that there was a nil effect since it really wasnt a cash flow?

Based on the answers I believe that is what is causing my NPV to be 3,013 million versus this 1170 that everyone is doing. since I belive it was 2,230 in year 1 and a smaller amount in year 2. That times the Cost of Capital of 12% would have made the difference

@christa316 said:
How did you guys arrive at this figure?

What did you do for the year 1 and year 2 tax losses? Did you add back the tax credit on the cash flows?

Did you add it back as a tax credit so that there was a nil effect since it really wasnt a cash flow?

Based on the answers I believe that is what is causing my NPV to be 3,013 million versus this 1170 that everyone is doing. since I belive it was 2,230 in year 1 and a smaller amount in year 2. That times the Cost of Capital of 12% would have made the difference

I got 3000m odd too for the same reason. The question definitely said the taxable losses were refunded in the same year so I added the taxable loss back to essentially cancel out the cash flow. I thought it was weird that the government would essentially be paying the company for making a loss but I couldn’t find any other way to interpret the question.

I too would be interested to hear from the people who got 1000m odd on what they did with the tax losses.

I added back the losses to balance the cash flow. It would have been similar to when they say that it would have been utilised against future cash flows. so I used the same concept as if it was like that and when it came to calculating the cash flow, added it back just like how we would add back for the tax allowable depreciation.