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When I think of the exam after the fact it doesn’t seem super hard, but i made it soo bad:(
Totally confused by yield-to-maturity, easy marks lost…
Hiw about the sentence about dividends in Q3? How you apply it to the calculation?-
I could be wrong of course but I read the dividends in the Foreign NPV question just as confirmation that all would be remitted to the parent in the same year which those cash flows arose.
And again could be completely wrong, but for the yield to maturity, you calculate the PV of the bonds cashflows based on the spot yield curve and credit spread. Then to an IRR to workout the annualised Kd (YTM)
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I think for the bond the market value was already calculated using the relevant spot yield curve for the year + Credit spread
For example
Time 1 – Interest – $7.5 * (1+Spot yield curve for 1 year bond + credit spread for that year)^-1
Time 2 – Interest – $7.5 * (1+Spot yield curve for 2 year bond + credit spread for that year)^-2
Etc etc. That gave market value or issue value of bond.
Then using you can repeat the same cashflows including the initial purchase of the bond at market value (thinking about things from the investors perspective.
But for the DCF do one at say 5% and one at say 10%, then plugging that IRR, I think gives you the YTM.
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Generally the exam was not that difficult but i kept on making some stupid mistakes especially for foreign NPV calculation i definitely got a zero because of incorrect rounding. I thought i was rounding the figures to millions whilst i was rounding them further to billions and ended up mixing millions and billions (revenue and costs in billions) , (investments , WK, TAD, RV in millions) and there was no tax at the end of the day because the TAD was so substantial compared to the contribution.
For book value of bonds i could have multiplied 0.45m bonds by $100 to get $45m but i took 0.45m as it was when calculating Vd. I realized it after i was almost done and time could not allow me to start all over again so i began to cancel and correcting every affected figure such that my whole answer was no longer presentable. I doubt if i am going to get the professional marks.
Also i found it quite difficult to discuss the results for the 10 mark question as they did not make any logical sense from what i had studied which means my calculations were also wrong.
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Debt valuation, WACC, CSR,
NPV with remittance, Hedging (currency)Overall was not a bad exam but I’d like to see ACCA formulating some data with more clarity. It’s not like in real life you don’t ask for clarifications.
Found that land valuation/ depreciation in question 2 awkward- anyone understood?
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Exam was not hard but complex.
Q1. (A) Calculate cost of capital was easy.
(B). Calculate mv of bond. Revised ke and wacc. Was not difficult but information gathering was complex.
FORGET OTHER REQUIREMENTS. I attempt for 22 marks as i run out of time.Q2. pre tax revenue was given. We need to deduct fixed cost to get operating profit. Then deduct tax and add TDA. Then allow working capital and then remit cashflow.
After this as components cost was already included in cost. Therefore ignore cost but charge tax (tp-cost)* inflation *tax. And then i applied discount rate. I get -ve npv and proposed to use apv instead of npv as npv ignore financing side effects.
Other areas it cover includes political, economical, compliance, ethical and cultural risk.
Q3. Currency risk hedging. Forward rate was of first choice then futures and options. Lockinn rate, i calculate using september future and and think was about 40 contracts use future and .08 contracts hedge using forward rate. Similarly for options, as it was receipt case and so i will be selling currency and contract size was given in R currency- i use put option which gives lowest receipt.Let me know if i missed anything!
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Q1. There was something to do with “crown jewels” re selling off gardening business to make the company less attractive for takeovers and also some form of “golden parachutes” ie significantly enhancing their remuneration in case of a takeover bid. There were 7 marks for discussing the effectiveness of the 2 methods in avoiding a takeover bid.
Another part, being not part of the report,was to discuss the approach re remuneration and employees treatment, i think.
Q2. I think you missed the part of the question re methods of bypassing the repatriation of foreign dividends as there was a possibility that this could happen if the regime was going to change.
Q3 you missed the part asking “compare and contrast currency and FOREX swap” -
You are on point mate, you sound like you have passed if you managed to answer the other discursive questions as it wasn’t hard. I totally slipped over the bond to maturity question as the information gathering looked too time consuming. I would have confidently said I probably pass had I not stupidly mismanaged the last hour on the foreign NPV question. The question was actually straight forward but I couldn’t get my head around the choice of words, as it wasn’t too clear to me on certain points like the tax exempt for the land disposal, the €10 sale etc. I have learnt it many months back, but. Just totally forgot about it.
Really kicking myself now, as I could have spent that time cracking on with the bond question and would at least secured marks to boarder line pass the exam, now I’m expecting marks in the region of 45-53 🙁 Same situation as the SBR exam I took yesterday!
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I’ll think ill be resitting that. The transfer and manufacturing cost bit confused the hell out of me. I ended up with of (1.9m)
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The exam wasn’t bad, I performed well on the discursive questions. I aced the hedging question. Had like 1 hour, was confident I would pass, but then that last 1 hour was spent trying to understand what the hell the transfer price of €10 euro, manufacturing cost, the 30% annual rate for the land and building disposal meant. I found it quite difficult with their wording of the scenario. Initially I thought I had to work backwards from the pre-tax contributions to arrive at the revenue.
Can someone confirm when it says that inflation rate were to be kept at 10% for the remaining four years, does that mean there was no need to inflate the figures as the inflation is to remain constant? Or did it meant I had to inflate it at a constant rate at 10% year over year?
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How did everyone treated the bonds? Did you divide the number given by 100 and then multiplied by market price. I did not divide amount of bonds given by 100 as thought it seemed like very little debt that way, so just multiplied straight away by 104 or 108. Anyone?
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I remember I saw the question in past year before onetime only, have to calculate forward rate then discount to get market value, and then use irr to find ytm
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I did the same mistake but they say you get penalised only once, so marks for calculating the wacc will be awarded even if the bond value is wrong.so around 1 mark here will be lost.
I did the same mistake when calculating the MV in part b, so here another mark is gone!
That’s why after exam it’s very healthy to relax and forget about it before you realise that everything you did is wrong.
They know that the exam is heavy and they will always put new elements to surprise us, just as they did in Q2 re land and buildings tax aspect, i think it was the first time to be tested in AFM paper.
So there is more to come, i just hope this was my last time to take this exam.this is the most technically demanding of the entire syllabus, so let’s be proud, at least we’re trying!
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I thought the exam was OK but there was so much to do that I voted for Hard. I don’t like the software either!
I didn’t even know there was a difference between Currency Swaps and FOREX Swaps!
I think it’ll be close but definitely think I can do better in December if needed.
Good luck all 🙂
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How was wacc calculated after the issue of bonds? How did you reflect all the bonds in the calculation
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So hard to tell how that went but i suspect not well.
Q1) Definitely wrong, bond value i somehow got was $108approx and left the ytm
Q2)I got a positive NPV of approx 14m with land and buildings being worth something like 230m and this as an inflow in year 4. Hoping that even if im way out, my justifications and explanations make sense and i get some marks.
Q3) Went for sell futures and buy put options. Said that forwards gave the best return and then talked about it.
Completely in the lap of the gods
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I think we just have to assume that the initial post tax cost of debt 4.1% should be used and add the two debt together. But my worry is the 0.6million they use for debt. It looks so small
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My version of the exam had
1) unbundling and acquisition of a company in the same industry.
2)forex hedging using forwards, futures and options, 6 mark question on swaps which I unfortunately left out due to time.
3)NPV, MIRR,MACAULAY DURATION AND a discussion on on the differences in those appraisal methods.I spent too much time on question one and barely linked my calculations to my report in a coherent discussion I could have done quite well, i need better time management, I hope I pass.
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I don’t know if anybody has the same issues like mine 🙁 the questions are ok I guess, but I got technical issue. It’s my first time taking cbe test in Hungary (abroad for me), i was panic when i realize the keyboard is different (they don’t show the character printed in the keyboard). I know there must be a switch mode to normal keyboard but i couldn’t find out. The facilitator couldn’t neither, so she helped me by trying match basic items (like + =) with the keyboard. In the end I tried to finish my exam but I lost too much time dealing with the computer. The word processor ran smoothly but others were disasters. Excel stopped running many times during the test. Each numbers were shown after 3-4 seconds like lagging. Formula only runs if i copy one by one, and didn’t move when i move the cell like the normal excel. I also can’t insert a row.
Other windows are also slow. When i open something I have to wait like starting window 15 years ago :(((I know I will have to re-take the exam next time, but really hope acca can do something about the computers 🙁
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I agree. The functionality of the spreadsheet shocked me e.g. drag and hold over cells containing numbers in excel produces a total on bottom right of screenbar. Not so in CBE. And trying to reference the question when it is in 5 different parts is a nightmare, unless you have a massive screen, and mine was the size of an average laptop.
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Hi all,
I am thinking to sit the AFM paper in December this year. This would be a re-take as the last time I sat AFM was last year December 2019 paper exam and failed with 43. Please may I ask for your experience with the calculations on WACC, futures, forward contracts and money market from the CBE exam.
Does it take longer (of fiddly) to do the calculations on their computer spreadsheet compared to the previous paper exam?
I am concerned I might be spending most of my time creating tables and making the formula work on their spreadsheet system.
Any answers on my question will be greatly appreciated.
Thank you for your time and I hope you passed the AFM exam.
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Hi Mikey200.
From my experience of doing the CBE for the first time, I thought the excel would be great and let me speed through the calculations. However the CBE practice test on the ACCA website is way faster than the excel spreadsheet in the exams.
I found today’s exam frustrating when trying to use the excel tool. It was extremely slow, the functions weren’t working. For example, I couldn’t copy the results of my 4 year cash flow into a new cell and the numbers showed up as zero. In the end I had to manually enter them but that leaves room for error…..I felt like it made my workings look more messy as I ended up just using my calculator and it was so slow to even type in the cells that I didnt bother as I was under pressure with time.
However based on my location the CBE is more practical rather than an exam center so I would probably choose to do a CBE again but be more prepared for the excel.
I did sent a note to ACCA with my feedback as I feel the tool on their website is way better and the tool on the exam day is more like the excel sheets on your google docs in terms of speed.
Hope this doesn’t deter you too much and is helpful 🙂 -
Largely agree with Danni, the software is diabolical considering its been around a few years now in the foundation level.
Whilst you may think that it saves time with the sums and formulas, which to be fair it does, all that tike saved is lost flicking back and forth through exhibits and stuff. There’s not enough screen space to have all relevant information in front of you.
Really they need two screens. One for the word processor and spreadsheet and the other for exhibits and requirements.
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My exam was a bit different to many above.
Question 1:
Two theory questions on unbundling vs a demerger basically. Both fine for me.
Fcff. I though was fine.
Calculate the synergy use PE ratio. Was a bit confusing but think was ok.
Had a 10 marker on calculating the % changes for three different payment methods. I was a bit lost on this. Would be surprised if I got more than 2 marks here.
Commentary on the acquisition. Just made as many points as I could.Question 2:
Npv, mirr, var and duration. Though it was very easy which made me think I may have missed something here. Got an NPV of like USD 20 million.Question 3:
Hedging of currency using forwards, futures and options. Was a bit confused and tired at this stage. What did people do? I sold futures and bought put options.
No idea what the difference between a currency swap and an fx swap. Wrote some waffle but I’d be surprised if I picked up any marks tbh.-
Q1: Unbundling and synergy benefits were pretty straight forward. Even completed proposal 1 and 2. Was satisfied the way my calculations were. But then I saw I was lagging behind. So took the tough choice of not solving proposal 3. Proceeded with preparing the report and the discursive part which I felt was not satisfsctory as I missed critical points. Couldn’t return back to complete proposal 3.
Q2: I had promised myself before exams that I would attempt hedging related questions at last, but considering the novelty of Q3 at glance, I ended up breaking my promise and did Q2 before Q3. Wasted a lot of time working and reworking between call and put and buy and sell. Ultimately settled for sell futures and buy put option. It didn’t seem to be right considering the wayward outcomes that I got. Took the short cut approach for futures using lock-in rates at (sept futures price + unexpired basis). For Options went for put option and ended up considering some fictitious spot rate of R71/$ as I was running out of time. Forex swap and currency swap I could vaguely remember involves swapping the future cash flow at today’s spot rate. I couldn’t build up on my answer as I was not sure and didn’t have time to apply my mind. Overall it was a miserable performance.
Q3: When I started reading this question in detail I cursed myself for not keeping up my pre exam promise of attempting hedging related questions at last. This was really an easy one with calculation of VAR, NPV and MIRR for project 3. NPV was $20m with 9% discount factor. Rest were already there in the question with some minor tweaking here and there. Life was made easy by CBE spreadsheet as I could calculate MIRR by plugging in the spreadsheet formula. Sad part I couldn’t properly explain the figures that I computed.
Overall it was an easy paper if one had solved past years’ questions. If I fail then I won’t be able to blame my luck as I couldn’t have asked for an easier paper
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First Time taking CBE.
My version of the exam had
1) unbundling and acquisition of a company in the same industry.
2) forex hedging using forwards, futures and options
3) NPV, MIRR,VAR & duration.
I have to say I found the excel spreadsheet extremely slow and slowed down my entire exam with cells not copying and numbers not showing up. -
Q1: Unbundling and synergy benefits were pretty straight forward. Even completed proposal 1 and 2. Was satisfied the way my calculations were. But then I saw I was lagging behind. So took the tough choice of not solving proposal 3. Proceeded with preparing the report and the discursive part which I feel was not satisfsctory by missing critical points. Couldn’t return back to complete proposal 3.
Q2: I had promised myself before exams that I would attempt hedging related questions at last, but considering the novelty of Q3 at glance, I ended up breaking my promise and did Q2 before Q3. Wasted a lot of time working and reworking between call and put and buy and sell. Ultimately settled for sell futures and buy put option. It didn’t seem to be right considering the wayward outcomes that I got. Took the short cut approach for futures using lock-in rates at (sept futures price + unexpired basis). For Options went for put option and ended up considering some fictitious spot rate of R71/$ as I was running out of time. Forex swap and currency swap I could vaguely remember involves swapping the future cash flow at today’s spot rate. I couldn’t build up on my answer as I was not sure and didn’t have time to apply my mind. Overall it was a miserable performance.
Q3: When I started reading this question in detail I cursed myself for not keeping up my pre exam promise of attempting hedging related questions at last. This was really an easy one with calculation of VAR, NPV and MIRR for project 3. Rest were already there in the question with some minor tweaking here and there. Life was made easy by CBE spreadsheet as I could calculate MIRR by plugging in the spreadsheet formula. Sad part I couldn’t properly explain the figures that I computed.
Overall it was an easy paper if one had solved past years’ questions. If I fail then I won’t be able to blame my luck as I couldn’t have asked for an easier paper
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I was highly disappointed today. They wasted all the hours I’ve put into studying. My exam didn’t launch after going through the check-in process way ahead of time.
Contingency systems on the OnVue platform didn’t help me well. Only to cancel and ask me to complete a form for reschedule. Too bad!!
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I feel the exam was a disaster.
The technical issue that I faced totally obstructed the flow of my answer and as result I lost so much valuable time and also messed up the 50 Mark question.
The paper was not that bad. But however, I feel I could have done much if it wasn’t for the technical issue.
I have sent a complaint to ACCA and I hope they will consider my issue.I personally feel they should have informed about the remote session right after June itself rather than informing 1 month before.
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hi everyone, does anybody remember how the cost of capital was calculated in the 3rd question when doing the NPV i just could figure it out and its driving me crazy remembering about it. the question had 4 different investment appraisal techniques to use. Any feedback is much appreciated. Thanks
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I had the same questions. If I remember the q gives you the mv of equity and the mv of debt plus the pretax kd so you only needed to find the ke.
Beta asset was also given so can use the asset beta formula to find be. Plug this into Capm and wacc it and gives you a do of 9%. Hope this helps? -
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The hedging part was a let down, I thought I mastered futures but the question was twisted, provided contract in indian rupees and I’m sure it confused a lot. I think the loss on futures had to be converted in dollar and then multiplied by no of contracts and contract size to get the correct figure. I didn’t convert to dollar and rushed through it. The question resembles a previously examined question namely Washi which came out in sep 18. The futures however were denominated in the local currency which made it simple. Totally disappointed, I revised AFM for months and didn’t expect a question of such sort.
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The more I think of the exam yesterday, the more I think I will be resitting in December.. the NPV q in Q2 completley threw me and I wasnt able to answer the discussion element due to time.
FX Q – I think I did ok on part a but again the FOREX/currency swap question was left unanswered as I thought these were the same.
Q1 I thought I did ok but the more I look back I think I made a mess of the beta element
I got 43 and 44 in my last two attempts of AFM, praying that I get the 50 this timeI dont like the CBE platform, many silly little things are taking too much time in an already time pressured exam even with plenty of practice
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Agree completely with the time and hassle of CBE. Frustrating as I really liked the CBE function on the foundation level exams as my handwriting is poor. Especially as they aren’t as time pressured than AFM.
You save 30 seconds using an auto sum ON EXCEL, then spend 1 minute shuffling round the exhibits and word processor and spreadsheet because the screen is too small to show all relevant data.
Why they can’t either give you two screens or a copy of the questions on paper to help time pressure is beyond me.
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To obtain the contract, all to do was divide 202m by 5m. Then we had to find the gain or loss on futures but the currency was denominated in Indian Rs per 1 euro, after finding the gain, I think I should have converted the loss in US dollar using the predicted spot rate (which is the current futures price) then multiply by no of contracts and contract size, another way of doing this is multiplying the loss in indian rupees x no of contract x contract size then divide the amount obtained by futures price or predicted spot rate (which are the same). I had no clue how to work out the amound underhedged.
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The exam was okay but too time pressured. I think if i would fail then it would be due to not being able to write due to time constraints.
The bond question is a bit similar to requirement b(i) of Conejo question (Q 48 BPP kit). What should be Kd when calculating WACC after the issue of new bond as both the bonds had different yield to maturity/returns required by bond holders?
I did not even have a chance to look at the other requirement of this question and thought someone at opentuition would comment on that. I assume the requirement related to difference between forex and currency swap was worth 12 marks? I wish I had 10 more minutes to complete that part of the question.
Forex swap actually ‘locks’ the rate at the start of the transaction and then the same rate applies at the end of the transaction so you are not exposed to currency rate fluctuations. Specially when you are dealing with a weak currency or investing/doing a project in a country whose currency is weaker or not easily available on foreign exchange markets. For e.g you invest money at To in a project at the spot rate at To then you would receive the profits at T4 for example at the same rate.
With currency swaps there are two parties involved. You borrow an amount in your currency from the bank in your country for the counter party and pay their interest. The counter party borrows an amount in their currency from the bank in their country and pays your interest. The principals amount and interest payments are exchanged between the counter parties. The objective is to save interest payments because it would be cheaper to get a loan in your currency in your country.
Question 40 Buryecs (part b) in bpp addresses both these areas.
I think there should also be a poll in here for the ACCA CBE platform. I think 80% + plus will choose hard or disaster but i hope ACCA are willing to improve the software based on our feed back. Just submitted my suggestions via the survey. I think ACCA should give students an option to either sit for the exam via CBE or paper based exam.
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I think the idea about the FOREX swaps and currency swaps is more to do with what type of question you are trying to hedge/what benefit you are trying to achieve.
I think the idea of the Forex swap is to hedge relatively short term (a year or less). Which could to hedge a future reciept or payment and involves swapping a principle with a counter party.
The currency swap still involves the principle swap with a counter party but is mainly set up to lower the cost of borrowing (using the estimation that a company co is likely to be able to borrow at a lower rate domestically than an overseas company will and vice versa.
These kind if swaps are usually used when financing a significant overseas project that might last years. Theyll essentially benefit financially from the swap due to paying lower interest.
So the currency swap is no use use to hedge a receipt in a few months. At least I think that’s the idea. That’s the sort of stuff I wrote about anyway, and recommended that a Forex swap would be much more beneficial and the currency swap would be a better fit to the expected expansion projects – not the future rupees receipt.
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I guess the cost of debt should be weighted average of total interest /total market value ?
difference between forex and currency swap was 6 marks,another one asking benefit of seperate treasury department , 6 marks-
@accboy729 thank you
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@accboy729 yes i calculated based on weighted average and the proportion which i used was related to non currency assets however i hardly mentioned any assumptions in my answer because of lack of time…
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hi, may i know how much of proportion of MVe and MVd in question 1? because i feel like i calculate wrongly for the MVe and MVd. it make the Wacc no much different
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AFM exam was okay. Preparatory to the exam, I was already palpitating when I seem not to be able to lift my hands gleefully on the specimen exam questions within the time allowed.
But glancing through the questions, I think God made it simple for me this time around!
I have read all of our comments; we all faced the same dilemma; perhaps made same mistakes, but generally the exam was okay.I expect markers will be leniet with marks and give us COVID incentive marking
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Was it even possible to complete the AFM paper in CBE mode? I did not attempt 29 marks, which was the second best attempt in terms of marks in my practice of 4 papers and the final exam.
Although I feel confident about the part I wrote and hopefully will pass but I would like to know from others if it was possible to complete CBE exam for AFM?
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