- This topic has 117 replies, 40 voices, and was last updated 6 years ago by
.
- Posts
Everyone going nuts about Q1 on here , rightly so, but the Npv was only 9 marks of the 50 , the hedge was straight forward and then the little working for debt required for 11 marks was great , add in your 4 marks for professional marks and then hope you wrote something with a touch of sense in the theory bits , we have to stay positive! ! !
@accastudentz said:
Q1
A) 5 marks investing in fx lands
B) 5 marks adv dis otc vs exchange options
C)
I) hedge & debt required 11 marks
II)NPV FX 9 marks
III) discuss above and something 9 marks
D)7Marks diff types of financeQ2
A)20 marks ratio and performance
B) 5 marks Behavioural financeQ3
A)6 MARKS fcfe of combined
B) share of benefit 6 marks
C) 7 marks synergies and issues
D) 6 marksThanks. I think the different types of financing was the last one in Q3
Any one tried finding exch rate with jpy and ard using the jpy/eur spot and ard/euro spot
??Was mostly comfortable with Q1 while going into 4th part of centralized treasury function until I checked the remaining time and that was just 1 hour more. With last part of Q1 and two more gigantic paragraphs to read it was all over for me. I was smilingly telling myself Bye bye September, Hello December!!
@kanchandhankar said:
Any one tried finding exch rate with jpy and ard using the jpy/eur spot and ard/euro spot
??Yup… then calculated JPY 1 how much ARD you get to use in NPV… which might sound absolutely ridiculous.
Where I was sitting i couldn’t see the clock as i forgot my own watch.. was dreading the whole time
I attempted Q3 first then Q1 and Q2 last. It was not prioritise by difficulty level.
Whatever part on I was stuck i left some space and moved on.
I atleast attempted all of the questions and their parts. Some finished some unfinished.
June session was first attempt . Failed at 44.
Lets hope for best !!
Wait for the result is always killing.
Good luck all@skyisthelimit said:
Yup… then calculated JPY 1 how much ARD you get to use in NPV… which might sound absolutely ridiculous.Great
Mine exch rate was 1jpy = .77 something
And then used inflation for japan and ards to calculate for Y1 2 3 4I was so confused about Eur inflation wasnt given to calculate six months spot rate for calculation of Futures and options
@kanchandhankar said:
Great
Mine exch rate was 1jpy = .77 something
And then used inflation for japan and ards to calculate for Y1 2 3 4I was so confused about Eur inflation wasnt given to calculate six months spot rate for calculation of Futures and options
Yup that’s what I got (I think- i can no longer recall my calcs now).
Wasn’t the exercise price to be used for options?@skyisthelimit said:
Yup that’s what I got (I think- i can no longer recall my calcs now).
Wasn’t the exercise price to be used for options?Yes excercise price should be used.
But what about calculating gain/loss and for deciding if you want to use options or not , you need current estimated spot rate/futures rate?@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 🙁Yes unfortunately, futures expiry was in 7 month and receipt was in 6 months. 4 months rate was irrelevant.
@abbas7796 said:
what was the premium on optionthe option should have resulted in higher receipt because the rate offered was 1.36. if it wasnt for the premuim
Option premium was something like 304m yen I think
@kanchandhankar said:
Yes excercise price should be used.
But what about calculating gain/loss and for deciding if you want to use options or not , you need current estimated spot rate/futures rate?Isn’t that for interest rate risk mgt? My brain is fried, I can no longer remember the steps.. Options there’s exercising the options , premium costs and over/under hedging…right? Then deciding on which gives a higher amount (final translated amount)? Or am I missing something…?
In the Q3a
I think it should go like:
Value of acquiring co.= 50m shares × 6.5 = $325m
Fcfe of acquiring co.= $325m/8=$40.63mValue of victim co. = 7(1+0.03)/(0.15-0.03) = $60m (using gordon growth model)
Fcfe of victim=$7m which is givenValue of combined =(40.63+7+5)*8=$421m
Gain in value = $421-(325+60)= 36m
Offer of 5 shares for 1 of victim gives 10m shares to victim.
Share value of new combined company= $421/(50+10) = $7.02
Gain by victim= $7.02*10m shares – $60m = $10.2m (17% gain)
Gain by acquirer=$7.02*50m shares – $325m = $26m (8% gain)
Anyone dome this.
Correct me if i m wrong.
Let me know if anyone has done it this way.The total value of acquiring company’share is 50 mil ( with 0.5$/ share ) so the total share is 100m shares, bro. The remaining of your answer i think were correct.
Question 1 was bad news. However thanks John I used your lectures and notes for this exam only that I started late.
@skyisthelimit said:
Isn’t that for interest rate risk mgt? My brain is fried, I can no longer remember the steps.. Options there’s exercising the options , premium costs and over/under hedging…right? Then deciding on which gives a higher amount (final translated amount)? Or am I missing something…?Estimating current future /spot price is step for both interest rate and currency risk.
For calculating under hedge over hedge you need spot rate on transaction date but when it is not given you estimate it by calculating unexpired basis and calculating lock in rate. Thats what my understanding is.
How did you do it ?@yogeniem23 said:
In the Q3a
I think it should go like:
Value of acquiring co.= 50m shares × 6.5 = $325m
Fcfe of acquiring co.= $325m/8=$40.63mValue of victim co. = 7(1+0.03)/(0.15-0.03) = $60m (using gordon growth model)
Fcfe of victim=$7m which is givenValue of combined =(40.63+7+5)*8=$421m
Gain in value = $421-(325+60)= 36m
Offer of 5 shares for 1 of victim gives 10m shares to victim.
Share value of new combined company= $421/(50+10) = $7.02
Gain by victim= $7.02*10m shares – $60m = $10.2m (17% gain)
Gain by acquirer=$7.02*50m shares – $325m = $26m (8% gain)
Anyone dome this.
Correct me if i m wrong.
Let me know if anyone has done it this way.I did the below part same as you and after that messed it up ..
Value of acquiring co.= 50m shares × 6.5 = $325m
Fcfe of acquiring co.= $325m/8=$40.63mValue of victim co. = 7(1+0.03)/(0.15-0.03) = $60m (using gordon growth model)
Fcfe of victim=$7m which is givenWhat do you think how much marks will I get for getting above right?
@anhbao0123 said:
The total value of acquiring company’share is 50 mil ( with 0.5$/ share ) so the total share is 100m shares, bro. The remaining of your answer i think were correct.It was 50 Millions share at 50 cents
Number of shares were given not the value of share.@kanchandhankar said:
Estimating current future /spot price is step for both interest rate and currency risk.
For calculating under hedge over hedge you need spot rate on transaction date but when it is not given you estimate it by calculating unexpired basis and calculating lock in rate. Thats what my understanding is.
How did you do it ?Estimated lock in rate by calculating unexpired basis and for option I got a perfect hedge of the full amount, hence no need to calculate under/above hedging…? And the way you did it?
Q1 – Took mainly my time. I concentrated first on theory parts. Left calculations when time was finished allocated to Q1.
About Q2 : was a nice surprise. but I had only Hour to finish Q2 & Q3 – 30 mins each.
In Q2: As far I remember, they asked for financial review and Business aspect review. Quickest way to do was to calculate change ( increase/ decrease ) in three years for Revenue, net profit, gross profit, . Debt to equity ratio. Increase in EPS , Share price, Cash equivalents and Current assets. Increase in revenue by product etc.
The companies financial performance seems better as it showed increase. However for some reason Cash was decreasing in line with PAT increase. I.e. As remaining Cash goes into Cash reserves generally.
Working Capital was improving as current assets seems to reduce, because it looks like debtors were being paid.
Lastly the institutional investor concern can be valid, as she seems more concern about business aspect of company. i.e. continuous growth of product line, such as P3 – Product lifecycle future strategy. Although CEO said they have competitive edge product, but no external market research to back it up.
Q3: I attempted only theory, no time for calculations
Thanks
My feedback to ACCA:
I’m sure the ACCA have heard the same thing already from many other students. The syllabus was not tested fairly for P4 in this session. I don’t mind there being difficult elements to a question, and the odd minor curve ball that will throw students but there should be some balance to allow students to prove their knowledge in other areas, this was not the case in this session. Q1 was difficult and had some odd twists which is fine but Q2 and Q3 didn’t test the syllabus at all. The value of the combined company in Q3 required quite a lot of on the spot thinking about the scenario and didn’t test any of the conventional cost of equity metthods. Q2 was the easiest but most students, like myself, would have left it until last and ran out of time. My comments are supported by the fact we didn’t need to use the formula sheet hardly at all! Whilst the examiner kept his word on the fact there would be a focus on syllabus sections B and E, they were tested in an unfair way, for instance getting 640 contracts would have confused many students and made them doubt themselves and waste time because anyone that has revised the past papers will only have ever came up with between 10 and 50 contracts, having to calculate forward exchange rates indirectly using another currency as a proxy in the same question was also a complication that was a step too far. When the examining team proof read their exams they should also check to make sure the paper is fairly balanced and the syllabus is fairly spread. Q2 and Q3 were not sufficient to allow students to prove their knowledge of the syllabus in my opinion.
I agree with Darren’s comments + having to use JPY currency when values are in the billions and you have to use a calculator which does not display thousand separators just makes the question unnecessarily confusing when surely ACCA’s aim should be to test the student’s knowledge and skills?
It does seem like it was a waste of time studying the BSOP, WACC, RAWACC, CAPM, M&M, DVM, DPP, MIRR, Macaulay duration, islamic finance, VAR, Unbundling, dividend decision, corporate failure & reconstruction, trade barriers, Tobins, levs, Greeks…etc
@skyisthelimit said:
Estimated lock in rate by calculating unexpired basis and for option I got a perfect hedge of the full amount, hence no need to calculate under/above hedging…? And the way you did it?I did calculate the receipt using futures and options but unable to compare those with estimated spot price so failed to calculate profit/ loss which will give net receipt so all in all I left it unfinished due to time issue.
- The topic ‘*** ACCA Paper AFM September 2018 Exam was.. Instant Poll and comments ***’ is closed to new replies.