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

For swaps , called it a 36 months period and finally gave a percentage rate effective as 12/36.

But yes , they confused with this 3 years thing.

Hopeing that doing the above doesn’t affect many marks

I am not sure why but it seems we are having different questions being set….

I had

Q1 APV etc etc
Q2 Interest rate swaps and collars
Q3 Demerger etc etc

So much calculations to do and explanations – very easy to overrun on time (as I did).

The problem, as always, is to try and remember everything I believe. No matter how much you practice.
Not very good unfortunately – March 2021 here we come again again.

I wish ACCA improve on their Excel – it is totally different from what we use in real life I think.

it was a weird exam… i wish i had APV…

i also prepared alot of stuff but didnt came up at all…

drizzley wrote:I did include the disposal. But still got negative flows in all years. Just that contribution from revenue was so small and additional fixed costs were quite large.
Maybe I misinterpreted the part about them having 1% of market share. And the revenues (3,765m – or similar) were about the whole market…

No, I don’t think you misinterpreted it, that’s what I got from it as well and I ended up getting a negative answer too, I was pretty confident of my method but since I got a negative APV too I was cast into doubt.

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.

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.

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

Do you remember the mark allocation?

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!

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,

I did the same… if they are concerned about 3 years worth of hedging this should have been incorporated in to the amount of contracts. Don’t think it would make sense to only hedge enough for 5 months? Also when I did this my results came out better than swap when interest rates dropped and worse than swap when interest rates increased, which seems correct

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.

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.