AFMACCA Paper AFM December 2020 Exam was.. Instant Poll and comments

Maybe I am wrong. I only doubled the market share from 1% to 2% (Year 1 to Year 2). Then used the same 2% from Year 3 and Year 4 My interpretation was that it doubles in Year 2 - I cant remember if it said it will keep doubling... Very weird exam I think.

bsara wrote:I got negative cash flow for first two and then positive…with regards to market share they said it will double so 1%, 2%, 4 and 8%…not sure if correct though…I left 14 marks for section B calculation…could not do so much in 3.15 mins.

Yep that's what I did too, feel a lot better about it now that more people had the same understanding. My section-B was horrible. In one question we had to prove that the cost of capital was 11% using PE and cashflow method and another was the swaps and collars one. I've seen nothing like it. Could only fully attempt the written part in these two.

I also got negative cash flows even after adding the Financing Effects

Not even examiner can write those in that much time. If we can not write what we know then how to judge our knowledge. Extremely time pressured exam

Do you remember the mark allocation?

couldnt believe they have a whole question about interest swap and collar, but not the usual futures and options. I did the football question and interest swap question first, then i have 1 and half hour left for question 1(the Nasi NPV question). when i got all the years negative NPV, i know this is done.... and didnt have time to complete the discussion bits....lets do it again in March... i hope they wont make these weird questions again

I got the same exam questions too. Q1) APV for the music streaming. From my understanding the contribution margins should have been 1%, 2%, 4%, 8%. Also the first year total market sales shouldn’t be inflated as that was the expected figure for year 1, but the 180 amount and subscribers should have been inflated by 2 & 3% respectively. I discounted the project by 12% after degearing the equity beta and plugged it in the CAPM. There should only be tax payable on year 4 only as losses got carried forward from year 1 to year 4. I think that the financing side effects for the loans should have been discounted by the cost of debt which I never had time to focus and was time pressured to be able to gather the information to calculate it. Gutted as I know these areas well. The got a positive base case net present value of 5.3 or 5.6 million euros. The adjusted present value I believe should have been negative, so the project should have been rejected. Otherwise it would have defeated the point of having both parts either positive or negative For the appraisal. There should have been opportunity cost loss which was the middle paragraph in the text, I was time pressured and never had the time to interpret the passage of text as I found it quite difficult to understand through the choice of words used. I spent 2.5 hours just doing section A, which pretty much left me with little to no time for the other sections. Only just quickly answered the discursive questions hoping to scrape some marks and hope for a border pass mark. I’m sure I have failed! Study extremely hard for this exam, felt gutted as I know the syllabus well, Only issue is not enough time and the damn small monitor with multiple exhibit windows fighting for room without overlapping one another! My hand was actually shaking as I try to move the cursor over to the spreadsheet cells to click, as it is so small on the monitor. My goodness the amount of time spent just navigating on the spreadsheet was unbelievable! Will do tax in March and probably go again AFM for every exam sitting until I finally pass it!

This exam was really tough and time pressured

For Q2 with asking to prove 11%, I tried to value using PE method and back-calc for cost of equity which so happen was around 11% too, not sure if this is what they are asking for. But for the valuation of the unit, I got drastically different answers via Aseet valuation vs Free cashflow valuation? Got 400m + for asset valuation and 200m-ish for free cashflow, Equity beta was like 2+ and cost of equity 15%?? Asset valuation was unit's share of non-current asset * 1.4 + unit share's current asset??? For Q1 think got positive overall APV, not sure if the 10m sale meant there was a gain on sale of 10m given no residual value for assets, but what about those assets with no tax allowable deprecation?. The senior managers' transition was also very confusing too - do we assume she gets paid at a rate post-inflation? (inflating 1.1m) - and still get fired at end of the project? Appreciate any thoughts,

If I remember correctly, residual value of 10 m was received so it should have been added in Year 4. Residual value of 0 was for Tax allowable depreciation, because only 40m and not the whole cost was available for TAD. I think I've adjusted for inflation 2.2m and add it as in year 4.

The poll is private for me. However I'm signed in.

My impression after exam was that it was difficult but I did what I Could and there is a chance to pass. But now I really doubt I will pass. My apv was 3.568milion possitive ? I also did not write anything for 10 Marks discussion regarding apv due to the lack of time.

Can u tell me what were the refinancing options For the football question? Seems few ppl got this question ...want to know what I missed...

Paper was tough. Revenues were so high and contribution margin was 25% in my question for the APV. I got a well positive base case NPV and APV in question 1. Couldn't figure out how to use the information on market share. Market share was #155m, when 1st year revenue only was #6750m and they are supposed to have 1% of it. Question 3 on interest rate collars and swap is a hoodlum. Question 2 was manageable, except the proof of 11% equity was quite tough. Couldn't crack the question.

I think there is need to relook at the time allocated to complete the exam with the introduction of CBE

I doubt i will pass this. One of the hardest exam more so on question 2