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10% was given at the base case rate
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I hedged €10 using both forward and money market
Y$50m was the cost for the investment. The difference from the hedged amount was the amount I used to compute the savings on debt for the financial side effects on the subsidized loan and issued cost.
Could anybody tell me how should we take into account interest on debt in APV, Q1:
Is it to be deducted out of operating profit in the base case NPV (and discounted by all-equity rate)? How then the tax rate could be applied to the profit AFTER interest?
Or is it to be included in “other costs” (and discounted by the free-rate)?
What is the rule and the logic of it?
Not the questions I expected at all. Thought there would be more on interest/foreign exchange, options, swaps something of that nature.
For question one I got the forward rate as a higher return than the money market but only marginally. About 26 million for raised by the money with an additional 24 million required for the finance. Think I got the APV component correct, remember doing a practice question that was very similar.
Didn’t expect the subject matter for 2 & 3, wasn’t all that confident on the main technical component but had a go, think I might have recovered marks on the discursive components.
One thing I did wonder about question one, did you do much to the Beta project in the initial NPV?
From my reading/recollection the cashflows were already discounted, just needed the initial 50m. taken off? Per recollection I got 5100 npv. With Alpha higher.
Did wonder if this was correct at the time as both had a positive NPV, from the sample questions I’ve done on APV they almost all ended up with a negative NPV, but are accepted due to the loan component.
Think it will be close to the wire.
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Got a negative for Alpha
Positive for Beta, I also got 5100 for the NPVExactly. One would be more concerned about delivering quality reports than time constraints. One can always work out a task plan while allocating delivery date with the clients.
I got the same result as you for Beta .
Alpha give the higher NPV
Which hedging gave the higher return ? the forward or the money market ?
The higher return was 25.9M and the loan was 24M
I thought I did something wrong in the calculation of the money market as I ( Invest -convert then Borrow ) instead of ( Borrow -convert -Sell )
The time was very limited , I only solved 1&3 and 2(C)
Do you solve Q3 ?- Topics: 0
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We were receiving €10, so for money market I borrow-covert at spot- then deposit, got a higher rate for the money market than forward rate.
I got a higher npv for beta. Grouped in the working capital for year 1 which was due in advance which pushed it over. Total return was higher on alpha though.
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Question 3:
Found the value of the two companies separately and combined with synergy. I Used the PE to find the market price of D. Co by inflating the PE of K. Co by 20%.Found the gain for using both cash and share for share option.
Found the new value of D. Co shares and K Co by taking the combine company value and divide by total # of shares (new shares included with K Co shares) and apportioned according to their share share holding each held.
Some of the bits I remember from my computation.
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ACCA seems to care more about money rather than teaching anything. This exam was a joke. Speed of writing test not a knowledge test. This should be minimum 4h exam.
I know but they are testing what you know about the syllabus. Nearly
Most of the syllabus was covered in all 3 questions which was quite nice to be able to use our knowledge. I am sure even if you got the figures wrong, you will be given lots of marks for your knowledge and application skills.I found the exam ok. I left the hall smiling but you never know 🙂 Good luck
Yes, it was done from scenario for project Alpha, but PV for project Beta was calculated based on all equity Ke. So how we should compare NPV from projects A and B?
I took the wrong sales figures in q1 (which i realised 5min before the end) so i ended up having a negative npv and apv dor alpha.
I have also a npv for beta of 5100 and apv of approx 6.7m for beta.
Can anyone explain question 2 on the dividend capacity? I was confused about the 2% profit margin. Didnt it seem weird? Or did i understand wrong?
For q3 my combined values including the synergies was not really much higher, so i said that 30% was not feasible, share for share would have resulted in 11% for target shareholders and 0% for acquiring.
Best option i chose the cash payment which resulted in value creation for both. Does anyone have similar results?So glad everyone else is feeling the same on time constraints. This exam is ridiculous. Although the questions them selves I felt were ok, we just didn’t have enough time to answer them. Maybe it will be possible when we are CBE
@dreid8966 said:
Not the questions I expected at all. Thought there would be more on interest/foreign exchange, options, swaps something of that nature.For question one I got the forward rate as a higher return than the money market but only marginally. About 26 million for raised by the money with an additional 24 million required for the finance. Think I got the APV component correct, remember doing a practice question that was very similar.
Didn’t expect the subject matter for 2 & 3, wasn’t all that confident on the main technical component but had a go, think I might have recovered marks on the discursive components.
One thing I did wonder about question one, did you do much to the Beta project in the initial NPV?
From my reading/recollection the cashflows were already discounted, just needed the initial 50m. taken off? Per recollection I got 5100 npv. With Alpha higher.
Did wonder if this was correct at the time as both had a positive NPV, from the sample questions I’ve done on APV they almost all ended up with a negative NPV, but are accepted due to the loan component
I got positive for both too
It’s kind of ridiculous, they are testing speed handwriting and speed calculator computation rather than knowledge. Nobody does such kind of tasks in real life with just a calculator within the time given.
Honestly, it is not that hard, but i can’t manage to complete it in time. Got blank on third question calculation part due to have one hour left, and still need to write all the writing part. Section 1 took me 2 hour plus.
I get 25.462m hedging amount using forward contract, money market hedge is lesser but marginal. Project Alpha NPV is around 5,562 if i remember correctly. And the duration is 2.6years. Forgot the amount for APV.
The dividend capacity i get for question 2 is 80M.
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Why no interest rate n forex question in one question of 25 marks??
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