AFMACCA Paper AFM September 2020 Exam was.. Instant Poll and comments

What were the q's like?

How did it go? What came up?

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?

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)

the machinery depreciation was 700m/4 a year The land I think has a sales value of 75m*1.08^4

I evaluated with 30% every year and then taxed in year 4 the gain... Anyway got bonkers NPV, i hope to score on most of other calcualations done right

The sales unit confused me, but later I realised it is for manufacturing cost, but no time already

How about wacc i got 11 percent for both. And npv was tough and its theory parr also confusing

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?

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

Yeah that's what I did, but it was total market value of bonds for wacc calculations I'm worried about.

Straight only

You didn't need to tax the gain as it said tax-exempt :) I had no idea what the NPV was either :(

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 :)

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?

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?

Well that was exactly what I thought so I scratched that and went straight to multipliying. As they later say they will invest 60mln in NCA, so those new bonds would not have been sufficient otherwise

I got like -4.3m for NPV I think. The paper wasn't as bad as I thought though but not sure I did enough to pass. Glad it's over

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!

I believe it was 10% annually for remaining four years so you had to use Purchase Power Parity for each year. I can't 100% recall but I believe Euro was base currency so it was; S1 = S0 x ((1+10%)/(1+4%) S2 = S1 x ((1+10%)/(1+4%) S3 = S2 x ((1+10%)/(1+2%) S4 = S3 x ((1+10%)/(1+2%)

I was confused I thought current swaps and forex swaps were the same thing. I wasn't even sure how to answer it.

same, I voted hard because of the time element but the exam was OK I also was confused I thought current swaps and forex swaps were the same thing. I wasn't even sure how to answer it. I stsrted writing how they work and left it unfinished. The NPV messed me up i was confused as hell.

How was wacc calculated after the issue of bonds? How did you reflect all the bonds in the calculation

I did that at first but then I realized that 0.6 mil is the number of bonds in issue, not value of bonds (otherwise it will be "$0.6m 6.5% bonds") so I scratched 100 and just multiplies with 104

Q1 b (ii)Can anyone tell me how the market MV of the new bonds should have been calculated by using the yield info and basis info provided? iii The post tax profit after accounting for the issue of the new bonds-anyone get 19.250m?

Was it receipt????

it was a payment so the aim was to give the lowest payment...

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.

Definately a receipt

Sounds correct to me. Other people incorrectly calculated debt as 0.6m meaning 0.6m worth of bonds and not 0.6 actual bonds.