*** ACCA Paper AFM September 2018 Exam was.. Instant Poll and comments ***

@accastudent1986 said:
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

I agree, we don’t expect to be tested on everything we’ve revised, but there should be some of the above in the exam. Q1 was difficult and an unusual layout and complexities, FX hedging and international NPV which had odd parts in itself like not starting for a year, and adjustments to operating profit etc. When I skimmed through the requirements at the beginning of the exam I was fairly confident but by the time I got to Q3 I was horrified to see there was a whole page of text and only one small paragraph that actually contained any financial information, I was expecting Betas, ungearing, regearing, CAPM, WACC etc. Q2 was easy enough but that’s not the point, we’ve all been revising the core syllabus for all these weeks if not months, so why not text us on that? I could have honestly almost sat this exam without studying P4. I think the only real P4 content was the hedging.

@accastudent1986 said:
When you say the project started in 1 year’s time is that the part where the question said to calculate NPV excluding the T0 investment? Hope that’s what it asked! I remember NPV being around 18,000m JPY excluding the initial investment 🙁

I actually can’t remember exactly what the question said, I don’t think it was very clear at all, but I took it to mean the initial investment would be made in 1 year from now. Actually that makes sense now because they said they were waiting for the Euro receipt and then would invest 6 months later. Although saying that I don’t think I discounted the initial investment amount.

The ACCA might argue this was only 9 marks and students should not waste too much time on it. That’s true in some cases, however it then impacts the other elements of the question, we need to finish the NPV and come up with some kind of sensible answer so that we can comment and discuss it in the report. How can we be strict with time and move on with an unfinished NPV if we’re then expected to discuss it in the report.. discuss what if we haven’t managed to get the NPV??

The exam didn’t seem very difficult in terms of technical stuff, but time management was very challenging due to Q1’s simple but uncomfortable complications (billions of ccy, cross exchange rate, one year offset of CFs, additional tax in Japan, lost contrib…etc) – for relatively not so many marks (btw I got negative NPV). Hedging part was standard.
I caught myself near to 2 hours on Q1 and then didn’t have time to properly finalize Q2 after doing Q3 in a rush.

Q3 was relatively straightforward in terms of equity valuation and Q2 seemed easy (although didn’t study that part of the syllabus, it seemed more of a common sense question on fin. analysis, probably F9 level).

Overall I agree it was not so interesting in terms of core AFM subjects like gearing/ungearing, WACC, APV, real options, FCFF or FCFE with complications or redeemable debt valuation, but it could have gone a lot more ugly in those areas where it’s a lot easier to get lost or make silly mistakes.

Anyone knows when exam answers will be posted on ACCA website?

Here are the questions posted, but it says coming soon for answers…

https://www.accaglobal.com/gb/en/student/exam-support-resources/professional-exams-study-resources/p4/past-exam-papers.html

Maybe we could ask John to do Q1 before ACCA publishes official answers?-)

@kanchandhankar said:
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.

Okay… calculating over/under hedging we can use the forward rates when given right? If i remember well we did have a six months forward rate and a spot rate?
Besides, if you have a perfect hedging there’s no adjustments needed as in under or over hedging right? Premium costs obviously but that’s all?
And then based on the three hedged receipts decide which one gives highest, combined with risk appetite of the company and so on? That’s my understanding but I may be wrong as well.

@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=$40.63m

Value of victim co. = 7(1+0.03)/(0.15-0.03) = $60m (using gordon growth model)
Fcfe of victim=$7m which is given

Value 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.

OK, I had a different approach, I valued the bigger company based on share price and the smaller based on fcfe growth.
I don’t even understand why I should have done for both, growth rate was not given for the big company.

https://www.accaglobal.com/gb/en/student/exam-support-resources/professional-exams-study-resources/p4/past-exam-papers.html

John air please give us the answer for this question paper

Overall, the exam was too hard, the 1st question was too lengthy and the last was had many interpretations. Lot of information was hidden and time pressure was enormous. !st question had just so much to do and was just not possible to complete within the available time.
The equity value calculation of the last question puzzled and needless to say could’nt complete it!! Lets see, what comes out, fingures crossed!!

I agree as per you said. I think AFM (P4) exam quite tricky different what you have learnt for the content especially for Q1, it spend me around 2 hours to do it, I even no time to finish the remaining parts.And Q1, the essay too lengthy and hidden some important information. This is my 3rd attempt, i think will be my 4th attempt again for my last ACCA paper!!!