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Did anyone else get a question where a company is going to acquire another company and need 3000Mil and wants *advice* to finance it and from which financial intermediary
Finance house
Investment bank
Investment trustWere the options
I read somewhere, that if the project continues you don’t add working capital at the end and if does not then you add it back.
Yea got it… at first i picked finance house… but i saw “takeover”, then the word “advice”. Then i picked investment bank ?????
I got 6 for TERP. Then just added some debt interest, but for some reason I said chose debt which is obviously wrong as PAT for debt would be lower due to the interest.
I got the Expected NPV with the variable cost using probabilities for 1st question in section C
The 2nd question was Equity and Debt.
I increased the PBIT by the % in the question. It said if the investment goes ahead PBIT will increase by that %.If you use equity the finance cost stays the same as per extract and if you use debt the finance cost increases by the 8% loan notes and then you recalculate the profit based on those adjustments and then recommend which is better.
I then just compared the interest covers rates with the current extract.
I see others got the TERP/EPS & P/E ratio which I didn’t do!Did anyone get the 7 mark question on short-term and long-term financing in Section C? It was part of Blank Co, if I remember correctly?
You couldn’t use the 8% as interest rate as that’s the coupon rate and not the effective interest rate.
Really tough question to know where to start, I worked out kd and a value of a right but the value of a right gave me a negative!
Yes I got this question! I actually read up on this last thing before the exam.. I explained the different funding policies for working capital – conservative (using long term finance for permanent and fluctuation current assets), aggressive (using short term finance) and matching (using short term finance for fluctuating and long term for permanent assets. Hoping that’s what they wanted!
Yeah I was also thrown off abit by this question. ACCA pulling out all it’s tricks to get us to mix it up lol
I got a Sec A question regarding efficiency of a not for profit transport service. Does anyone know what the answer is?
I got the same exact section C @irinatabala…. my NPV was in the minus but your answet x4…..
@riyasivaraj I got NPV of minus 300, 000 too
Did anyone get the FRA questions to calculat I cannote remember the exact figure what was requested. there were rates given from years 4-5 and 5-9. How did you answer it? for me hedge accounting is the trickiest part of the exam
Yeah me too, last min read up, but I remember very well for Conservative, the fluctuating current assets were part financed by long term finance not fully. And I also stressed on the importance of balancing liquidity and profitability to reduce liquidation risk. But sec A and B provided the balance. Very challenging indeed.
Hey, I had that question!
They gave you an interest rate of 8.6% which needed to be tax adjusted (30% corp tax rate), i.e. 8.6% * 0.7 = 6% 🙂
Hi Roby
I did the same as you. Buying was cheaper by about $600k give (roughly). For the written question, I did agreed that the deduction in the tax liability was financially more desirable. Depending on their risk appetite, they may prefer the lease option due to the ability to cancel the contract in the event of being obsolete 🙂
Hi Graham
I had the same as you! Oh boy did I answer it differently…I was under the impression that preference shares aren’t tax deductible? I took it as Interest/MV, although as the nominal value was less than 1 I did roughly the following: 6*nominal rate/market value. Uh oh!
Did anyone had the NPV question which was stated that profit was after depreciation charge? In section C
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