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It is so hard paper. I don’t have enough time to read q3. So I left it blank paper. I don’t know why acca try to lengthy question???
Thanks.. that’s at least one mark or so then…
Npv I deducted the loss in sales… I’m not very sure that was good now…
1) adjusted the sales, deducted tax and deducted the amounts from translated
2) contribution , adjusted with inflation, calculated tax on it. Added after tax figures
3) calculated 15% adjusted tax on remitted cash flowsThe exchange rate I don’t what cross multiplication I did … omitted that part of explanation while revising and was trying to recall what it was… blank moment for that.
1. It is forward. Not future contract.
@accastudentz said:
Q1
I got Futures giving me the highest net Receipt.
NPV was such a head F**k, but I think I had logic to what I was doing, just don’t have that closure as we have never seen a question like it. had to translate the figures from ARD to € to then get them to YEN. took a few reads, serious head melter.Q2
Ratios & Trends for 20MARKS?? madness, straight out of P7 Q1 Analytical procedures type question, think I performed ok, the owner was window dressing as gearing was increasing along with Interest cover reducing , be difficult to continue Constant payout ratio DivQ3
FCFE for combined entity, one was FCFE with growth and the other was using a Multiple.
a bit of guess work, but couldn’t ram home the final part.all in all a very difficult unusual paper
To be fair, I was beginning to question my calculations midway. What I was doing in Q1 wasn’t really making sense to even me anymore. I got completely confused at converting JPY to EUR and then to ARD and then to JPY.. It was just so confusing. I wasn’t too familiar with how the examiner structured the exchange rates this time
It’s quiet surprising to see a whole 20 marks on ratios and application though.. didn’t see that coming.. managed to calculate and apply 5 ratios.
Thank God I finished ALL the theory questions before looking at any of the numbers. Would have lost some easy marks..
If I still don’t pass, roll on APM!!
Additional debt finance, it seems I’ve got it completely wrong… Only said the difference in amounts… pfffft.
Options had the lowest receipts and forwards had a slightly lower receipt than futures but after writing about company’s risk appetite, if they want to avoid any risk of fluctuations in premium forward contracts would be recommended then at the expense of a higher additional debt required than futures.Spot rate minus the seven month contract rate given? And from that calculate the unexpired basis?
I was sooo upset about that 20 Mark question on ratios???
Of all things – I even studied Islamic finance, but was not expecting that…
I poured my heart out about how horrible this exam was the on ACCA feedback – do they want us to pass???
@skyisthelimit said:
Spot rate minus the seven month contract rate given? And from that calculate the unexpired basis?but what do u subtract the basis from? u need the spot rate in 6 months time right?
To be honest the question 2 about ratios should not come as a surprise, given your past paper Sep/Dec 2017 had a 21 marks section on the same thing 🙁
10 marks on ratios calculations are quite generous I would say
Spent way too long on Q1. I calculated 160 contracts but clearly gone wrong somewhere as I can see most of you got around the 640 mark for contracts. But did find Futures to be the best out of the 3.
Exchange rate also confused me for NPV just had to go for the spot rate in the interest of time. Didn’t even get round to answering the Treasury question.Q2 seemed okay but felt my detail could have been more and Q3 on FCFE was a complete disaster. Attempted 89% but not hopeful.
@goeswhatever said:
but what do u subtract the basis from? u need the spot rate in 6 months time right?You use the spot rate given and subtract the basis from it… because you are given spot and seven month rate but you need to find six months’ rate so that’s how you calculate the lock-in rate… or am i wrong?
I used the alternative way. I calculated the unexpired basis (1/7) then added it to futures.. so effectively I should get the same answer as you.
I believe you’re correct
@skyisthelimit said:
You use the spot rate given and subtract the basis from it… because you are given spot and seven month rate but you need to find six months’ rate so that’s how you calculate the lock-in rate… or am i wrong?oh yes, theres lock in method to use…I totally forgot about it. damn…
options would have got most receipt if there was no premium. the premium was for 300m alone
You forgot 4 month given? 7 subtract 4 x 2/3
@mjibola said:
I used the alternative way. I calculated the unexpired basis (1/7) then added it to futures.. so effectively I should get the same answer as you.I believe you’re correct
Overall not too bad a paper. I managed to have a decent go at every question. Hopefully I did enough and have just APM left!
Question 1 was pretty tough with a lot to do in the time given. I got the futures hedge as having the highest receipt, using the unexpired basis (1/7) to find the lock in rate.
To get the JPY-ARD exchange rate you had to use the 2 sets of euro spot rates given to you, then use the inflation rates to roll it forward. I’m not sure I used the right ones out of the 2 sets of rates to do this though!
The project had a negative NPV after factoring in the lost sales, extra contribution and the 30% tax on those plus 15% additional tax on the Airnone profits.
I was running out of time and didn’t put much in my report for 1c. There wasn’t much information to go on for non financial factors I didn’t think. I talked about seeing if there were any follow on options which could be valued and might make the value positive. At this point I’d used up the allotted time so concluded my report to get the professional marks. 1d was a little waffling about centralised vs individual treasury teams.
I too was surprised by 20 marks for ratio analysis.This seemed more like a P3 question to me. Even though there were past exam questions like it, I assumed it wouldn’t come up and didn’t practice it much.
However there was plenty of information in the figures to use, including some that contradicted the CEO’s comments. 2b was behavioural finance, I talked about herd instinct, confirmation bias and anchoring.
Question 3 I calculated that Chris Chawon gained about 64m and the current owners actually lost money so the deal should be renegotiated.
In 3b I said there were quite a few reasons as to why the synergies might not be achieved such as the different staff culture and the different financial and operating gearing approaches, and that Chris Chawon wasn’t a suitable person to lead the transformation.
3c was something about what factors would the board consider in deciding what kind of finance to issue, I waffled a few points for this and then time was up!
Was the closing futures price given for 7 months time rather than 6? If so I’ve messed that up by using a 7 month buy price instead of using basis 🙁
what was the premium on option
the option should have resulted in higher receipt because the rate offered was 1.36. if it wasnt for the premuim
@accastudent1986 said:
Was the closing futures price given for 7 months time rather than 6? If so I’ve messed that up by using a 7 month buy price instead of using basis 🙁It was given for 7 months contract… i dont think you will be penalised by a lot for that, you’ve surely done other steps well.
wait… premium was for options, what the hell have i written above then.. i hope i wasnt as confused when actually writing my answer as how i am right now trying to recall.
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