AFM*** ACCA Paper AFM December 2018 Exam was.. Instant Poll and comments ***

@niccpx said: I calculated value of Tai co using free cash flow method, and deducted 400m debt (market value) to get value of equity of Tai co. And took this figure to divide by number of shares. Share price of Tai co is $3.80, if not mistaken

I got this exactly also. 1400 total market value, deduct the 400mv debt to get 1000 equity value :)

I divided by 6 months future (buy dollar rate)

I used given Ba on CAPM gives 12% I think (cannot remember)

If you receive CHF and contract size is also in CHF , then you don't need to divide. My contact size was 98. However Company was USA based and they needed to convert into dollar so you needed to divide in order to received in US$. Not sure if I did right

I think issue cost was not tax allowable for tax. It was stated in the question.

Did you calculate PV of Tax lost on govt debt interest? Also did you find the bank loan repayments by taking AF for 4 yrs risk free rate (I think can't remember )AF 3.363, then calculated the 4 yrs bank interest And then discounted bank plus govt interests in order to get pv of interest ??

I think 157m positive. I cannot remember exactly

I don't exactly remember but I think APV was 157m Did you calculate PV of Tax lost on govt debt interest? Also did you find the bank loan repayments by taking AF for 4 yrs risk free rate (I think can't remember )AF 3.363, then calculated the 4 yrs bank interest, And then discounted bank plus govt interests in order to get pv of interest ?? Thats how i calculated

I don't know if i did right but, For part b I think half of the answer were given in the question itself ? Just needed to explain it with concept.

I think the total equity value after debt was 1000 and Pao 5000

I also did exactly. Hope finger crossed

@niccpx said: I calculated value of Tai co using free cash flow method, and deducted 400m debt (market value) to get value of equity of Tai co. And took this figure to divide by number of shares. Share price of Tai co is $3.80, if not mistaken

I did the same and got $3.8 FOR Pao I think the total equity value was 5000

For everyone on the futures rate, we have a receipt of 12.3m CHF and the rate is 1.03 $ for 1 CHF Therefore regardless, you’ll want to eventually multiply by the 1.03’since dollars get you more than CHF

@bejkaad said: If I remember correctly in the exam the exchage rate1.034 was stated to be quoted USD/CHF. I was now googling how to read quotas. The currency to the left of the slash (USD) is referred to as the base currency, and the currency on the right (CH) is called the quote or counter currency. The base currency (in this case, the U.S. dollar) is always equal to one unit (in this case, US$1) It can be thought of as the amount of CHF (1.034) that you would need to sell if you wanted to buy US$1. So you need to divide the amount in CHF with the rate given to get amount in USD and it will be less than 12.3M.

I would have to disagree with you on that. I think regardless we’ll lose 1-2 marks top But I looked up the CHF/USD rate and it says currently that 1 CHF gets you $1.01 therefore in the case of the question the 12.3m CHF will get you more USD and so you multiply And from past questions; the exam rates given are always presented on the stronger/weaker currency. Ie: if they gave you a GBP/USD rate it would always be 1.+ /1$ as opposed to 0.7 for example to 1 dollar since the pound is always stronger than the USD

How did you guys get 157m for apv I had single digits sigh... I thought I did well in this paper but now I don't think so.. I know where I fell down was calculating the growth on the fcf for Tai as a perpetuity. I didn't remember that foreseeable future was perpetuity.. I was thinking one year growth... I wonder how many marks were at risk for that growth calculation. What did you guys say Tai would prefer as an acquisition offer?

No brother, you are wrong here. 1.034 USD = 1 CHF then, X = 12.3m CHF Just do a simple cross multiplication. You will get a higher dollar amount. The google will also tell you that CHF is stronger to USD and for every 1 CHF you will get a bit more higher US dollar.

@vatalya said: How did you guys get 157m for apv I had single digits sigh... I thought I did well in this paper but now I don't think so.. I know where I fell down was calculating the growth on the fcf for Tai as a perpetuity. I didn't remember that foreseeable future was perpetuity.. I was thinking one year growth... I wonder how many marks were at risk for that growth calculation. What did you guys say Tai would prefer as an acquisition offer?

Chill bro, as long as you carried out the basic calculations alright and took your own figures to conclude at the end you will pass the question.

@adarshjanan said: No brother, you are wrong here. 1.034 USD = 1 CHF then, X = 12.3m CHF Just do a simple cross multiplication. You will get a higher dollar amount. The google will also tell you that CHF is stronger to USD and for every 1 CHF you will get a bit more higher US dollar.

Agreed.

@vatalya said: How did you guys get 157m for apv I had single digits sigh... I thought I did well in this paper but now I don't think so.. I know where I fell down was calculating the growth on the fcf for Tai as a perpetuity. I didn't remember that foreseeable future was perpetuity.. I was thinking one year growth... I wonder how many marks were at risk for that growth calculation. What did you guys say Tai would prefer as an acquisition offer?

My APV was also 157m Regarding first question, Tai was perpetuity but I think the combined was not as combined was growing at 4.2% after the 4th year

Someone post earlier that SBR Dec18 has been uploaded by ACCA..I tried to find it but cannot locate ....however, have seen the question today in some other platform...surprisingly it is quite fast it is out!!...

What did you guys write for the reasons to change from conglomerate to new portfolio structure?

As regards the foreign currency hedge, it definitely mentioned xxxUS/CHF 1. I checked this three times during the calculation. For the APV question I think the approach was to calculate the net cash flows and discount them with the cost of equity using the ungeared beta (12%) resulting in a negative NPV. Then get the tax benefits p.a. and discount them with the tax free rate (4%) and add them to the NPV which then, became positive.

@adarshjanan said: What did you guys write for the reasons to change from conglomerate to new portfolio structure?

I spoke about the needs of the shareholders and risk diversification. It moved from a small set of shareholders who invested all their wealth in the company to diverse individual and institutional investors who would be well diversified so they don't need a single company who is into many different businesses. I hope I nailed that sigh

@vatalya said: I spoke about the needs of the shareholders and risk diversification. It moved from a small set of shareholders who invested all their wealth in the company to diverse individual and institutional investors who would be well diversified so they don't need a single company who is into many different businesses. I hope I nailed that sigh

Yeah that was my rationale essentially. Since the new shareholders are already diversified (unsystematic risk essentially all reduced by their diverse holding), the company diversifying adds no benefit to them and instead adds cost over benefit I’m glad we agree

Hey Everyone ! A very interesting thread about AFM exam Dec 2018. Seeing polls and discussion, the paper was setup in fair manner to not only test our understanding of the subject but also time managment skills. Like many, I unproportionally gave Q1 about 2 hours which I believe was excessive. However the most suprising bit was Question 2 which was a googly from examiner given Currency hedging was tested in last attempt with an almost identical question. Thanks to my past paper revision I was able to pick that one. Question 3 I believe was the easiest, given you have looked up the past papers. The most challenging part for me was Q1 part c second and third requirement. I went blanked with share to share and mixed option calculations. Anyway I managed to atleast complete my exam and felt satisfied with overall experience. Following are my key takeaways from the exam: - Cover majority or all topics in study text. - Past papers are key to success. - Develop an understanding of each topic. - Dont forget techincal articles. - Stay focused and keep a close eye on clock during exam as time managment is also important. I dearly wish that all of the students who had studied hard shall pass the exam. All the best, F.

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In Question 2 during Calculation i divide rate in all three steps forward future and option please help me how many number deduct

In question 2 in all three step forward future and option i divide how many number deduct please help me

Hi everyone, AFM questions are already published, anyone knows when will be answers published ?

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