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  • This topic has 112 replies, 34 voices, and was last updated 6 years ago by United Arab Emirates.
Viewing 25 posts - 51 through 75 (of 113 total)
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  • Author
    Posts
  • March 8, 2019 at 8:17 pm #508683
    Champ
    Member
    • Topics: 1
    • Replies: 31
    • ☆

    I got wacc approx 12 .7 something

    March 8, 2019 at 8:18 pm #508686
    beth18
    Member
    • Topics: 4
    • Replies: 13
    • ☆

    @skyisthelimit said:
    Hell yes! Good luck for June sitting

    Best wishes with your results. Hope you pass this sitting.

    March 8, 2019 at 8:23 pm #508688
    beth18
    Member
    • Topics: 4
    • Replies: 13
    • ☆

    @citrus1986 said:
    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”

    This is really good advice, practice is important and more of it is very important as it helps you remember and be prepared for every question no matter how it is examined.

    March 8, 2019 at 9:05 pm #508700
    aishling82
    Member
    • Topics: 1
    • Replies: 19
    • ☆

    There was no investment appraisal Q anywhere. I thought that investment appraisal was standard to be asked somewhere? Small 5 marks on Q1 as to why they should appraise using APV. Happy that interest rates came up & only studied bond valuations and yields the other day so that was ok. Other than that I got completely lost In Q1. Q3 was a head wreck & had no time to even read it properly let alone figure out what was being asked! I really hope I don’t have to sit this for 3rd time, but doubt I got to the 50%

    March 8, 2019 at 9:19 pm #508702
    yumnakaraja
    Member
    • Topics: 0
    • Replies: 1
    • ☆

    Hi,
    Best of luck to all appeared in Mar 2019 attempt.

    I am getting prepared for June, pls share precisely which topics were tested in Mar.

    Thanking you in anticipation!

    March 8, 2019 at 9:34 pm #508703
    Tural
    Member
    • Topics: 5
    • Replies: 24
    • ☆

    I wrote about having real option like option to follow/expand, any ideas?

    March 8, 2019 at 9:34 pm #508704
    aishling82
    Member
    • Topics: 1
    • Replies: 19
    • ☆

    Q2 Interest rate risk: FRA, Futures & collars
    Q1 Change of capital structure with bonds. Calculation government yield, bond valuation & yield. New asset beta & cost of equity etc. No similar past papers like it.
    Q3 potential merger/ acquisition of 2 different companies. FCFE figures provided no cash flow calculations.

    Q2 was probably most predictable and similar to other past papers. The other 2 were challenging!! No investment appraisal or fcfe calculations

    March 8, 2019 at 9:49 pm #508707
    Tural
    Member
    • Topics: 5
    • Replies: 24
    • ☆

    Guys, the question regarding hedging, I believe didnt mentioned about collars, it said options on interest rate futures. where did you notice “collars”?

    March 8, 2019 at 10:10 pm #508709
    beatab
    Member
    • Topics: 0
    • Replies: 15
    • ☆

    @tural199227 said:
    Guys, the question regarding hedging, I believe didnt mentioned about collars, it said options on interest rate futures. where did you notice “collars”?

    I think it said option collars…
    You are not the only one who did options instead of collars.

    March 8, 2019 at 10:13 pm #508710
    Tural
    Member
    • Topics: 5
    • Replies: 24
    • ☆

    @beatab said:
    I think it said option collars…
    You are not the only one who did options instead of collars.

    The question was quite similar to Sep-dec 17 past paper Q4.

    March 8, 2019 at 10:58 pm #508715
    Tural
    Member
    • Topics: 5
    • Replies: 24
    • ☆

    @aishling82 said:
    Q2 Interest rate risk: FRA, Futures & collars
    Q1 Change of capital structure with bonds. Calculation government yield, bond valuation & yield. New asset beta & cost of equity etc. No similar past papers like it.
    Q3 potential merger/ acquisition of 2 different companies. FCFE figures provided no cash flow calculations.

    Q2 was probably most predictable and similar to other past papers. The other 2 were challenging!! No investment appraisal or fcfe calculations

    In Q3, minimum acceptable price, was there net asset of the target company? I couldnt find thats why I found MV of equity + 60% of synergy.

    March 9, 2019 at 12:11 am #508716
    irfanullahjan
    Participant
    • Topics: 2
    • Replies: 27
    • ☆

    Q1 a: Factors affecting financing through debt. I discussed gearing risk (which was low), whether tax benefits could be realized, availability of cheap debt finanance, whether sufficient cash flow will be available to service debts (profits were fluctuating) and the need to match long term debts with project cash flows.
    Q1 b: My aset beta came out as 0.85 as well. Cost of capital 9% (rounded up). Can’t remember cost of debt though but used IRR for that and used post-tax coupon cash flows. Redemption was at 103 i.e. 3% premium.
    Q1 c: Discussed how APV is calculated but my answer was weak in convincing why APV was a better technique.
    Q1 d: The part which asked about securitization of lease inflows if I remember it right. I left it blank coz couldn’t remember the topic well.
    Q2 a: Net interest income on FRAs was 456k, on futures 458k at both 4.5% and 3.5% spot rates. Collar returned higher benefit but only if interest rates rose and lower than both FRAs and futures if interest rates fell. Since interest rates were expected to fall, I advised against collars and recommend futures instead.
    Q2 b: I stated something like: in the long term cash flows do smooth out but in short run losses can be significant. Don’t know if this is the right answer.
    Q2 c: Gamma and stuff. Left blank :p
    Q3: The numeric part was a disaster. What did they mean by FCFE multiple of 8? Apart from this, I found the question really vague in details needed to value the companies. But I did quite well in the discussion parts coz I also studied for SBL.
    Best of luck everyone!!

    March 9, 2019 at 4:34 am #508729
    Champ
    Member
    • Topics: 1
    • Replies: 31
    • ☆

    Can anybody tell me how we need to calculate beta asset. for first similar competitive company… I have calculated total ba of first competitor company…then it was said that it is engaged in two activity which 20 % similar to marte co and beta asset of its 80% operation was given so I calculated 20 % beta asset value of first similar company and second similar competitor has all the same activity so normally calculated beta asset by using formula and then added them both and divided by 2…..is I am right….????

    March 9, 2019 at 4:59 am #508730
    Champ
    Member
    • Topics: 1
    • Replies: 31
    • ☆

    What was new market value of debt and equity you used..as I think for equity it was 100×15 and for debt I used 3 million ×mv of bondthen divided by 100

    March 9, 2019 at 5:52 am #508735
    skyisthelimit
    Participant
    • Topics: 24
    • Replies: 95
    • ☆☆

    @accaayush said:
    Can anybody tell me how we need to calculate beta asset. for first similar competitive company… I have calculated total ba of first competitor company…then it was said that it is engaged in two activity which 20 % similar to marte co and beta asset of its 80% operation was given so I calculated 20 % beta asset value of first similar company and second similar competitor has all the same activity so normally calculated beta asset by using formula and then added them both and divided by 2…..is I am right….????

    Did the same, because the finance director asked for both asset betas to be weighted equally

    March 9, 2019 at 5:54 am #508736
    skyisthelimit
    Participant
    • Topics: 24
    • Replies: 95
    • ☆☆

    @accaayush said:
    What was new market value of debt and equity you used..as I think for equity it was 100×15 and for debt I used 3 million ×mv of bondthen divided by 100

    Based on cost of debt I calculated it was some $3.2m and value of equity $1500 given the share price would change after construction project

    March 9, 2019 at 5:57 am #508737
    skyisthelimit
    Participant
    • Topics: 24
    • Replies: 95
    • ☆☆

    @beth18 said:
    Best wishes with your results. Hope you pass this sitting.

    Thanks a lot! Hope so too
    Good luck for June sitting… 🙂

    March 9, 2019 at 6:05 am #508738
    irfanullahjan
    Participant
    • Topics: 2
    • Replies: 27
    • ☆

    @accaayush said:
    Can anybody tell me how we need to calculate beta asset. for first similar competitive company… I have calculated total ba of first competitor company…then it was said that it is engaged in two activity which 20 % similar to marte co and beta asset of its 80% operation was given so I calculated 20 % beta asset value of first similar company and second similar competitor has all the same activity so normally calculated beta asset by using formula and then added them both and divided by 2…..is I am right….????

    I first ungeared the beta to get overall asset beta of first company. Then put that into an equation such that:

    overall asset beta = 0.80*Ba of non-tech contruction + 0.20*x

    Then solved for x to obtain beta asset relevant to contruction of tech parks.

    Then added the tech-devision asset beta as above and that of second company and divided by 2.

    March 9, 2019 at 6:08 am #508739
    irfanullahjan
    Participant
    • Topics: 2
    • Replies: 27
    • ☆

    @accaayush said:
    What was new market value of debt and equity you used..as I think for equity it was 100×15 and for debt I used 3 million ×mv of bondthen divided by 100

    They said there were 3 million bonds so we didn’t have to divide by 100.

    March 9, 2019 at 6:30 am #508744
    vind1994
    Member
    • Topics: 5
    • Replies: 19
    • ☆

    In Q1b, we were just supposed to calculate Asset beta of that 1st company right? And no bond was given directly. So we had to find the value of the bond using the yield rates and the 6% bond information right? Can you guys tell me if that is the way of doing Q1b?

    And for the cost of capital we had to use the combined asset beta right?

    March 9, 2019 at 7:33 am #508751
    jcbacca
    Member
    • Topics: 0
    • Replies: 20
    • ☆

    Very tough paper, but trying to follow everyone’s comments is so confusing

    Did anyone pick up that it was 3 million bond? And not $3 million bonds? So had to multiply nominal value by 3 to give you 300 million? I missed had to change last second.. I knew something had to be wrong, why would the examiner make us calculate and regret with a company value of 1500m and 3m nominal value of bonds..

    I calculated the bond price to be 105.6? But like an idiot I forgot to do the final IRR on the price at 6 percent to find the true cost of debt.

    Collars I think I spend atleast 5 minutes just looking at the question. Calculate the new premium of buy call and selling put.

    If interest rates rise, would do.better
    We wouldn’t exercise, but the buying of output would. Still better

    If they dropped we would exercise our call but the buying of put wouldn’t..

    In q3, did anyone discount the fcfe valuation? I wasn’t sure has it had seemed we were given fcfe of most recent years and not future.

    But had to get market value of acquired at t expected required premium of l.

    Which was 14 percent? So I took no shares, multiplied by share value. And multiplied by 1.14

    Using fcfe method. I calculated market value of both companies using shares.

    I then added the fcfe of both companies, added the 9 m synergy (damnit was this pre or post tax) and then multiplier the fcfe multiplier of 8 by 1.05. Because the case said it expected it to rise.

    I then took this value and deducted it from the current market value of both to calculate the benefit.

    Took 40 percent of this and added it to the market value of l. So total price was around 600m?

    Final one, I used first section (14 pecent) MV. Deducted it from the synergy we calculated. And the left overs was.be the premium company T would get.

    No idea if this was correct.

    And guys cost of capital is WACC.

    Q1 beta, never have I seen a question with a change in both business and financial risk. But I regeared the .85 asset beta with the new debt of the company
    To calculate the cost of equity of the project. Just made sense coz we don’t ever use asset beta to calculate WACC which was the final requirement in question 1bii

    Good luck everyone, I don’t plan on failing but if I do I hope you guys pass.

    March 9, 2019 at 10:02 am #508768
    skyisthelimit
    Participant
    • Topics: 24
    • Replies: 95
    • ☆☆

    I spent a few mins on the wacc calculation because it was a bit weird but didn’t realise to check the three million or $3million
    Oh well… Good luck to you as well

    March 9, 2019 at 11:46 am #508776
    auseklis
    Participant
    • Topics: 0
    • Replies: 8
    • ☆

    Q1.At first calculate asset beta at 80% from company’s beta. Then take 50% of each company’s asset beta, get asset beta 0.85. Calculate equity 1500m. MV of Debt 317M, taking 3 million 100$ bonds (6% coupon, 3% premium). I got re around 10%, rd around 5%, wacc don’t remember maybe around 9%. Risk free rate as 1 year govt bond yield which is 3%. Govt yields added with BBB rating, get bond price around 105$.
    APV better due to change in capital structure (previous gearing 0, now around 17%).Wrote report to board of directors.
    Q2 Forward rate FRA4-8 used, got 3.19 eff interest rate and $358 eur reciept or someting, Futures June, 48 contracts, don’t remember the receipt (maybe around $346) but it was worse than for FWD rates. Interest rate collars – sell call, buy put, premium has net from sell and buy. In interest rates rise, collar gave better result, but worse if interest rates declined.
    Delta hedge – buy shares, sell call options on these shares to hedge against decrease of share price. can be calculated ar N=Nr of shares/N(d1). Gamma , rate at which value of option changes, as delta changes.
    Q3 Describe what will determine success of acquisition of company. Wrote about synergies – financial, revenue and cost. Describe feasability of Pacman defense and White knight tactics against hostile takeover. Wrote that it would be challenging to find buyer for $580M company, and a lot of resources needed for taking over the bidder (need to raise debt or equity)
    Didn’t have much time for Q3. Calculated the equity value before and after, using FCF of both companies + 7, then multiplying by FCF to equity multiple to get the equity value after the acquisition. Then calculated synergy benefit and split to each shareholder.

    March 9, 2019 at 12:13 pm #508780
    Champ
    Member
    • Topics: 1
    • Replies: 31
    • ☆

    Did you remember how much asset beta you got as I approached the same way as yours

    March 9, 2019 at 1:06 pm #508785
    irfanullahjan
    Participant
    • Topics: 2
    • Replies: 27
    • ☆

    I believe it said 3 million bonds i.e. number of instruments. I might be wrong :p

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