*** ACCA P4 June 2018 Exam was.. Instant Poll and comments ***

@adolf121, out of time, totally skipped the swap, but should the EIR be 4.6% = -(L+0.4%)+L-5% according to the info you mentioned below? anyway, I got no mark from this sub-question:-(

@adolf121 said:
I think the swaptions wanted us to explain what 1 X 4 meant and then show the effective rate achievable.

Since hickamore can and usually does borrow at L+.40
They will receive L
Pay 5%
giving an effective rate of 5.40%

Im not quite sure about this tho.

@adolf121 ah, thank you! Then it means that I only attempted 86 marks in total. Now I just wish my accurate rate might be around 60%….

@adolf121 said:
5 marks

@finansist for Q2, “FCF for 4 years at a different rate”, didn’t remember any info provided in the question hinted different rate for cash flow of year 1 – 4. Could you elaborate a bit more? I may totally miss some critical info:-(

@finansist said:
Sadly, the areas that I didn’t revise and was weak came up.
Q1. Got BSOP wrong however NPV calculation was decent. Discussion bit was also good I think I was able to pick up some marks here and there. But just left soft capital rationing requirement completely as I was running out of time.

Q2. Was relatively straight forward for me. I am hoping for most marks from this question. FCF for 4 years at a different rate and then two estimates with 5% and 0% growth thereafter. Ungeared Ke and APV calc.
Also discussion for reasons for acquisition and disadvantages of asset based and p/e valuation.

Q3. FCFE calculation however was a bit tricky because foreign subsidiary involved. Got messed up with calc, sadly. Discussion parts were about dividend policy and increasing dividend repatriation in light of agency theory. Again bit muddled here.

Q4. I would love to do this question but was put off as soon as I saw “SWAPTION” in the discussion requirement.

Now just hoping for pass…

@adolf121 oh, I see. I got this part, two different rates of CF of year 5 and onwards:=)

@adolf121 said:
There were two rates to be used.

Clio director wanted to use Zero growth after year 4 and Polymnia wanted to use 5% growth rate to perpetuity.

So we had to find two FCFF values.

By the time I finished q1 I only had an hour and few minutes left.. spent a bit too long in q1.. I could barely finish my q4 on hedging..

I think majority of the question was straightforward though.. just so much to read and digest, figure out what and how to do it within a very limited time.

How did anybody calculate the basis unexpired risk? I struggled here and just assumed something.. Fingers crossed till July

@adolf121, again rushed a lot in this question:-(, totally forgot to scan MVd of Polymnia during exam, but tried to recall critical info of the question now, don’t think that the question provides any info related to Polymnia’s capital structure. Not sure why you may try to find out value to equity holders of Clio. Shall try to find out MVd of Polymnia, then get MVe (TMV derived from FCFF – MVd) of Polymnia and compare the bid/ask price to see if the price is acceptable?

@adolf121 said:
Did you find the value to equity holders of Clio after finding the FCFF values?

If so did you deduct the amount paid to get to the additional value to Clio

or did you use the 55% to find the equity value?

@acca145 said:
last session p4 was easy, I attempted 75% and still got 50 % first time. good luck to students this session.

I attempted 71%. Time pressure…I hope I scale through.

Is there anybody who fully completed the paper ??

As I didn’t !! I left 19 marks straight

I got the same result – 5.46%

@adolf121 said:
Anyone got 5.46% for futures?
This was weird. Both alternatives came up with a loss but Effective rate was same tho.

With today’s experience for P4, I would suggest you to go through all technical articles. In addition to that practice past papers & work on time management.

Hope it helps.

Yep. The df was 11% (11.2). The NPV of phase 1 was around $85 m. Without delay phase II was $(190)m ish. With BSOP phase II was $170000 odd.

Anyone else get these figure? Please say yes.

@gt0707 just a guess based on the marks allocation of similar question in the past, may lose 6~8 marks at maximum if not adding 40 basis points, as such may lead to incorrect calculation of “impact of interest rate increase and decrease with future” (about 3 marks), “impact of interest rate increase/decrease with option” (about 3 marks) and “discussion & recommendation” (about 3-4 marks in total)

@gt0707 said:
hello guys,
do you have an idea how much marks we gonna lose if the 40 basis points is not adjusted to the interest rate. And the interest cost (calculated using 5% & 3.4%) is used.