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- June 8, 2019 at 6:06 am #519769
gotta a question to talk about islamic finance equivalent for equity and messed up the spelling for musaraka and spelled it as musaraba lol my explaination for it was right tho will i lose market over that???
June 8, 2019 at 6:12 am #519770did anyone get npv for a machine which showed negative cash flow in first year i see now one talking about that and wacc and to find out cost of eq using divident growth model and capm
June 8, 2019 at 6:21 am #519773@snell123 said:
Yes but there was a question before that were you had to work out the required return. It was something like current dividends value was 725m which equates to 14.5 per share with annual growth of 2.7% divided by share price of 65 then add the growth onhi i had converted 2.7% into 3 so it’ll still be valid right???
June 8, 2019 at 7:03 am #519778@aliansari14 said:
For the cost of equity using the DGM
I got 25. % Something also I think, don’t remember the one with asset beta oh wait I think 8.somethingFor section B , the working capital question went bad for me couldn’t find the cash operating cycle days and quick ratio so I guessed,the other risk management and market value business valuations were simple but the thoery was abit tricky.
That working capital question screwed me too! I read it and thought ah nice easy marks, but couldnt get the quick ratio at all
June 8, 2019 at 7:29 am #519781AnonymousInactive- Topics: 0
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@wigjimin said:
hi i had converted 2.7% into 3 so it’ll still be valid right???Would of given a slightly high cost of equity, but that’s not to say my answers was correct
June 8, 2019 at 7:50 am #519735I had section c, EOQ then aggressive vs conservative, hard capital rationing, long term vs short term debt, npv, ratios, explain roce and then projects to maximise npv that were divisible
Hated most of a and b tho!June 8, 2019 at 9:26 am #519803I also got the working capital which initially baffled me.
When I reached the quick ratio question I couldn’t get an answer that was there, but then I re-read the question. It was asking for the quick ratio of the NEXT year, which included an additional debt of some sort.
Using this information I got an answer.
I got section C questions on CAMP and DGM which asked only for Merits and was worth 6 marks. I said that CAPM was universal for new project that companies are unfamiliar with because it looks at the current market and what the risk for a similar project it, which gives a good indication of how much the funding of such a project is currently costing. I went on the day that DGM was not as good as CAPM for the validation of projects, but it considered growth which should enable companies to consider future dividends for equity. I don’t know if I got any marks here.
I also got the question on Islamic Financing and I panicked so listed 4 with explanations – Sukuk- debt finance (irrelevant but oh well), Mudaraba (shareholders and agents), Musharaka (joint venture) and Ijara (lease finance) I also explained the concept of Islamic financing and probably spent too much time on this question (but I was pretty proud as I’d been studying Islamic financing that morning).
I also got the NPV question. I got a positive NPV. Depreciation calculation on a reducing balance at 25% works as follows:
Y1) 1,000,000 * 25% = 250,000 allowance.
Y2) (1,000,000 – 250,000) * 25% = X (don’t have a calculator).Your final allowance is calculated by deducting the scrap value from the remaining balance in Year 4 (from the question). This is your remaining WDA allowance, this is multiplied by the tax rate to give you the final benefit. The amount I got was significantly high. I also put the allowances in the years that they corresponded to, rather than the next year as it was in arrears… was this correct?
I got a payback period of 3.25 years. I got this by doing a cumulative income chart and dividing the remaining negative balance by the total balance in year four.
I said that the project should be accepted purely from a financial perspective, however as the directors had a two year maximum payback period and would automatically reject this project.
On the next page I had to explain what they could do to improve their investment appraisal approach and I gave quite wishy washy answers on how they hadn’t considered new inflation rates and are likely to be outdate, that they shouldn’t just be considering the payback period and that they may want to consider other methods such as IRR, RI, or ROCE.
Please let me know if you disagree with my answers. It would be nice to know where I’m at. I got an awful section B foreign payments question which I pretty much just guessed!
I was diagnosed with tendinitis is my writing arm on Monday and sat two exams. I’ll be so happy if I pass them given my amount of effort ?
June 8, 2019 at 11:41 am #519825@tonim said:
I also got the working capital which initially baffled me.When I reached the quick ratio question I couldn’t get an answer that was there, but then I re-read the question. It was asking for the quick ratio of the NEXT year, which included an additional debt of some sort.
Using this information I got an answer.
I got section C questions on CAMP and DGM which asked only for Merits and was worth 6 marks. I said that CAPM was universal for new project that companies are unfamiliar with because it looks at the current market and what the risk for a similar project it, which gives a good indication of how much the funding of such a project is currently costing. I went on the day that DGM was not as good as CAPM for the validation of projects, but it considered growth which should enable companies to consider future dividends for equity. I don’t know if I got any marks here.
I also got the question on Islamic Financing and I panicked so listed 4 with explanations – Sukuk- debt finance (irrelevant but oh well), Mudaraba (shareholders and agents), Musharaka (joint venture) and Ijara (lease finance) I also explained the concept of Islamic financing and probably spent too much time on this question (but I was pretty proud as I’d been studying Islamic financing that morning).
I also got the NPV question. I got a positive NPV. Depreciation calculation on a reducing balance at 25% works as follows:
Y1) 1,000,000 * 25% = 250,000 allowance.
Y2) (1,000,000 – 250,000) * 25% = X (don’t have a calculator).Your final allowance is calculated by deducting the scrap value from the remaining balance in Year 4 (from the question). This is your remaining WDA allowance, this is multiplied by the tax rate to give you the final benefit. The amount I got was significantly high. I also put the allowances in the years that they corresponded to, rather than the next year as it was in arrears… was this correct?
I got a payback period of 3.25 years. I got this by doing a cumulative income chart and dividing the remaining negative balance by the total balance in year four.
I said that the project should be accepted purely from a financial perspective, however as the directors had a two year maximum payback period and would automatically reject this project.
On the next page I had to explain what they could do to improve their investment appraisal approach and I gave quite wishy washy answers on how they hadn’t considered new inflation rates and are likely to be outdate, that they shouldn’t just be considering the payback period and that they may want to consider other methods such as IRR, RI, or ROCE.
Please let me know if you disagree with my answers. It would be nice to know where I’m at. I got an awful section B foreign payments question which I pretty much just guessed!
I was diagnosed with tendinitis is my writing arm on Monday and sat two exams. I’ll be so happy if I pass them given my amount of effort ?
Section C DVM vs CAPM: I said how dvm considered growth and dividend and CAPM considered systematic and unsystematic risk, portfolio diversification, beta risk. Think the business in question went from one to to another, music player so CAPM was more relevant for specific cost rather then cost of capital.
Islamic finance I wrote ljara (lease) that benefits eg no initial cost, repair cost to lease etc. And musharak, sure I spelt this wrong but explained venture capitalist and how they help with finance and received percentage of profit.
Was payback not first converting profit into cf by dividing the depreciation each year and then doing cum cf? I got something like 3 year 8 month or 9 months. I was confused if I had to divide the .88 by 12 months to get the months.
Project should be accepted from npv point and reject from payback point as over 2 year target but npv superior.
They could improve their investment descion by using other investment appraisal methods irr, intergrating risk and uncertainty eg sentativity analysis. I also got the inflation rate out of date as historic average.
The Npv question I didn’t understand the residual value was not discounted by 5% what did this mean? I put the tax and depreciation but one year in arrears. I inflated up the cf from year 1, should it have been year 2? Used money cost of capital.
Section a and b was really hard so just guessed most of them. Hope to achieve a few good marks section C and section a and b to just bump be to 50!
June 8, 2019 at 12:32 pm #519833Total risk is the sum of systematic risk and unsystemtic risk
June 8, 2019 at 1:37 pm #519841@ajaved5 said:
On NPV cash flow, you inflate by the 4%. E.g
£100 sales inflated at 4% would be
Y2: 100 * 1.04
Y3: 100 * 1.04 * 1.04
Y4: 100 * 1.04 * 1.04 * 1.04 etc.You do not inflate year 1 as this is your base figure.
June 8, 2019 at 2:20 pm #519843@tonim said:
On NPV cash flow, you inflate by the 4%. E.g
£100 sales inflated at 4% would be
Y2: 100 * 1.04
Y3: 100 * 1.04 * 1.04
Y4: 100 * 1.04 * 1.04 * 1.04 etc.You do not inflate year 1 as this is your base figure.
I got that wrong, I started inflation at t1. What about the residual value undiscounted at 5%
June 8, 2019 at 2:27 pm #519844Pls what was npv value
I got about 3m
Did u add scrap value to d npv calculationI got 2yr 7month for payback cal.
Pls what was NPV for that question
June 8, 2019 at 2:30 pm #519845@ajaved5 said:
I got that wrong, I started inflation at t1. What about the residual value undiscounted at 5%I also inflated from year 1, I think this is correct though? As the cash flows represent the end of each year and no inflation had been applied to any of the figures.
June 8, 2019 at 2:57 pm #519848@xanpech said:
I also inflated from year 1, I think this is correct though? As the cash flows represent the end of each year and no inflation had been applied to any of the figures.I thought the same but I could be wrong, what would current/real terms mean?
June 8, 2019 at 2:59 pm #519850@mareeam said:
Pls what was npv value
I got about 3m
Did u add scrap value to d npv calculationI got 2yr 7month for payback cal.
Pls what was NPV for that question
Yes would would need to add scrap value to the nav. Don’t remember my final answer.
June 8, 2019 at 4:06 pm #519854Perhaps I was incorrect then.
I’ve always considered the Y1 to be absolute and the inflation rates a forecast for the future.
June 8, 2019 at 4:09 pm #519857I don’t understand why you would inflate the current year as Y1, the current price, are the prices that are actually being charged… inflation is an indication for future years, how much MIGHT be charged based on a future trend of increased prices.
June 8, 2019 at 6:10 pm #519884My NPV question said that tax is paid “at the end of the year it relates to” – is that the same thing as tax is paid in arrears?
June 8, 2019 at 8:12 pm #519896AnonymousInactive- Topics: 0
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hmmm I did opposite.
I actually thought that the R&D and depreciation was mentioned just to fool you because the question gave profits/(loss) and said that they were already included in the profit/(loss) calculation so I just accounted for the 100% allowances in the first year ($600/4yrs *80%).
I then tax the figures and discount them to get a negative NPV.
I advice against the investment.June 8, 2019 at 8:15 pm #519898AnonymousInactive- Topics: 0
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hmmmmmm
June 8, 2019 at 8:36 pm #519903AnonymousInactive- Topics: 0
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@khilen said:
My NPV question said that tax is paid “at the end of the year it relates to” – is that the same thing as tax is paid in arrears?that one confused me too.. but in NPV calculations, the cash flows are always year-end so I leave the taxes in the year (yr1/yr2/yr3/yr4). no yr5 so no arrears.
June 8, 2019 at 8:38 pm #519904AnonymousInactive- Topics: 0
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@liamb said:
I think the 100% allowance in first year just means you just calc whatever the tax rate was of the investment (like 15% of £600k) and use that as a positive cash flow in year one – which made my NPV positivehmmm I did opposite.
I actually thought that the R&D and depreciation was mentioned just to fool you because the question gave profits/(loss) and said that they were already included in the profit/(loss) calculation so I just accounted for the 100% allowances in the first year ($600/4yrs *80%).
I then tax the figures and discount them to get a negative NPV.
I advice against the investment.June 8, 2019 at 8:41 pm #519905@xanpech said:
I kind of felt the same way, did the BPP revision kit 3 times! And the past exam papers, but only 50/50 if I passed coz found section A and B harder than I expected and often you just have to get one thing wrong and lose the whole 2 marks. Most annoyingly I somehow had a blank on the price/earnings ratio question, then as soon as the exam was over I realized what I should have done and its not even a hard question, so I think it was partly exam stress getting to me aswell.It’s so frustrating isn’t it. I did about 8 past ACCA papers, 6 full mock exams and went through about 150 questions from the huge question bank, and still got stumped on a lot of questions that came up. ACCA really do make it so difficult and don’t provide the best resources to learn from. A lot of in depth knowledge I had didn’t get tested at all 🙁
Fingers crossed we both did enough to pass 🙂 good luck with your result!!
June 8, 2019 at 8:42 pm #519906@liamb said:
That working capital question screwed me too! I read it and thought ah nice easy marks, but couldnt get the quick ratio at allI know how to work the quick ratio out and still wasn’t getting the same answer as what they gave to work from :/
Baffling!June 8, 2019 at 8:46 pm #519907@ajaved5 said:
I got that wrong, I started inflation at t1. What about the residual value undiscounted at 5%Inflating at T1 would be correct as far as I know. The figures they give are at today’s date so if it says £100 sales and 4% inflation T1 would be £100 + 4% then T2 would be £100 + 4% + 4% and so on.
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