*** ACCA Paper AFM March 2019 Exam was.. Instant Poll and comments ***

4-8, since amount should be invested till 1 september

It was 4-8 FRA @ 4.10 on 36 million.

guys on Q1, I calculated asset beta using weighted average method – based on equity of 2 companies. I think asset beta at the end was equal to 0.53.

Then I dont remember how I calculated risk adjusted Ke. I dont know it seems I used asset beta itself instead of equity beta on CAPM model. MV of equtiy of the company was $1800 m but I could not find MV of debt to regear.

How did you calculated risk adjusted Ke?

@daniyalanjum1994 said:
It was 4-8 FRA @ 4.10 on 36 million.

Yes that’s correct. 4.1%.. Used that too

Hello guys,

Can anyone tell me which topics were asked in this sitting as I am planning to sit this exam in June.

Many thanks.

@tural199227 said:
Risk adjusted WACC, FRA, futures, options – interest rate risk, APV, benefits of acquisition, what to consider when getting debt finance, pre-bit & post-bid strategies against takeover, etc.

Many thanks, seems like a time pressured exam from what you guys are saying.

@beth18 said:
Was it tougher than the Dec exam?

Hell yes! Good luck for June sitting

This is as far as I remember questions and mark allocations

Question 1
a Discuss factor affecting financing decisions (debt or equity) 8marks
bprepare a report which shows
bi calculate asset beta of new construction project 7 marks
bii calculate cost of equity, cost of debt and cost of capital 15 marks
biii explain and justify the methods used calculation of above estimates 6 marks
c show how APV would give better estimate than NPV 6 marks

Question 2
a recommend hedging strategy between collar futures and FRA 16 marks
b Discuss the director view that interest rates should not be hedged or be hedged using internal techniques such as smoothing 5 marks
c explain delta and gamma and how they can be used in delta hedging 4 marks

Question 3
Calculate minimum price that the target shareholders would take
estimate valuation in FCFE if 60% of the synergy benefits accrue to acquiring shareholders.
Estimate %% gain from acquisition 10 marks

Discuss suitability of targets Lagrid and Popham 5 marks
In a due diligence review of acquisition target what would be the main concerns of the BOD of acquiring firm 4 marks

Question 1 b iv was for apv and npv discussion 6 marks.

And c was for securitisation something. I’m sorry but I cannot remember the exact words. To explain or discuss how this would help the company to get funds in future. Something like that. Worth 5 marks.

@jez22 said:
Risk free Rate was the Spot Yield rate of year 1 which was 3% I think.

Asset Beta weighted 0.85

MV Bond was around 105… cost of debt the IRR, roughly 5% pre tax.

Cost of capital 9.2 % something

WACC around 9%

Hedging FRA 4.1 was best
Futures 48 contracts

Got the same one!

@mackawara said:
This is as far as I remember questions and mark allocations

Question 1
a Discuss factor affecting financing decisions (debt or equity) 8marks
bprepare a report which shows
bi calculate asset beta of new construction project 7 marks
bii calculate cost of equity, cost of debt and cost of capital 15 marks
biii explain and justify the methods used calculation of above estimates 6 marks
c show how APV would give better estimate than NPV 6 marks

Question 2
a recommend hedging strategy between collar futures and FRA 16 marks
b Discuss the director view that interest rates should not be hedged or be hedged using internal techniques such as smoothing 5 marks
c explain delta and gamma and how they can be used in delta hedging 4 marks

Question 3
Calculate minimum price that the target shareholders would take
estimate valuation in FCFE if 60% of the synergy benefits accrue to acquiring shareholders.
Estimate %% gain from acquisition 10 marks

Discuss suitability of targets Lagrid and Popham 5 marks
In a due diligence review of acquisition target what would be the main concerns of the BOD of acquiring firm 4 marks

Thanks for this, wishing you the best with your results hope the markers are more lenient and give you all passes!

Examiner article is must in this exame, skipping it will cost you atleast 10 marks in exame so please print and read them. Dont make the mistake that i did.
Q3: was more than half theoritical, only 10 marks for calculation and requirements were very confusing for example
Effectivness and feasability of reverse bid and white night.
Q2: calculation a bit straight forward but discussion again confusing like “ smoothing, gemma”
Q1: lenghty based on degear and regear of betas, market value of debt and then wacc.

My advice would be to wait until you get your results, you never know, plus it will give you much needed rest.
In the event you do fail my advice would be to go practice every question in the BPP practice kit and to read the technical articles. I would aim to do 2 of the 45 min questions each day in the week and 6 on each of the weekend days. Thats 22 45 min questions per week which means you’ll need around 3 weeks to get through them all. As you will have around 6-7 weeks from results to exams I would repeat again for another 3 weeks and then spend the last 1-2 weeks doing 1.5 hour questions (1 per day in the week) 2 or 3 per day on the weekends (Do these under timed conditions). Aside from that during the whole period you should be watching John Moffats videos, he has around 60 on AMF and they cover everything you need and make it very clear. Watch these alongside the 6 weeks you spend doing the 45 min questions.
There is no such thing as reaching your limit its just a matter of practice.
This is just the approach I would take and everyone is different so do what works for you but hopefully you get some value from this.
PRACTICE PRACTICE PRACTICE!
Remember…
“Everything always seems difficult, until it isn’t”