AFM*** December 2021 ACCA AFM exam – Instant Poll and comments ***

Not a bad paper. Ran out of time

9am -12pm Q1 - Reasons for unsuccessful acquisition and methods for resolving this (in given case) -Estimation of value per share of target company before acquisition - Estimation of number of shares to issued against share for share purchase -Percentage gain for shareholders of each entity -Likely reactions of shareholders of each entity -If purchase is made through cash then dividends will be reduced from 50% to 10% how shareholders of acquirer are likely to react to this. Q2 -Benefits of centralised treasury department Interest rate derivatives, FRA, futures, options, A term *Smoothing* was asked for three marks. Q3 - -NPV calculation with an option to delay BSOP input variables -use of above information -Why NPV and BSPOP value are different, advise financial officer 13 pm - 16 pm Q1- Estimate gain to shareholders through cash vs share for share Method to value individual and combined- FCF Impact of each offer on financial performance and likely reaction of shares Ethical issues Q2- APV calculation Advantage of APV Factors determining credit rating Q3- Adv of centralised treasury Interest rate risk hedge through FRA futures options Interest rate Smoothing

Too close to call. It was mostly direct questions but the first aquisition question was information overload. Could have scored more if I hadn't kept it for last. The APV and hedging questions were direct but it all hinges on my calculations being error free. I feel like I'm going to get somewhere between 45 and 55.

I had the same questions. Did you get a negative NPV and APV?

had the same questions. Did you get a negative NPV and APV?

Negative NPV of about 3m, positive APV of about 12m is what I got

I was expecting a positive APV so thougg I had done something wrong. I discounted the cash flows at 12% and finance costs at 8%.

For Q2 which hedging did you find give the highest rate?

I got negative APV. Please tell me you got the same.

Negative NPV about 13m , negative APV about 2m I think. Did you?

Forward rate was lowest (good) , options was highest (bad)

GRA 6.3, futures 6.31 options 6.6. You?

I also discounted the cash flows at 12% but discounted the APV stuff at 3.2%,did you tax your cash flows?

But I recommend options as media reported probable reducing rates

I got the same

I couldn't decide between 8% and base rate, but I think both are acceptable. Yes, taxed tax profits abs calculated tax shields

Yeah both should be acceptable I wish I'd stated that on my paper haha. And I remember on the APV question that the cash flows were already poat tax but who knows anymore

JakeDoughty wrote:Negative NPV about 13m , negative APV about 2m I think. Did you?

Somewhere in the vicinity I think.

JakeDoughty wrote:GRA 6.3, futures 6.31 options 6.6. You?

FRA fixes the rate at 5 point something right? I hadn't revised this part well enough. Futures and options effective interest rate were mightily close, with options slightly worse. I'm probably wrong.

For the interest rates question did we have to exercise the put option? I found that there was a gain on the FRA, futures and options. Not sure if that’s correct though?

What did you get when calculating the Estimate gain to shareholders through cash vs share for share?

I had collar. Could not remember exactly but futures>FRA>collar. Futures and FRA is around 4.1-4.2 and collar around 3.7% Did you get the same?

How did you guys calculate share value of target co.? Is the additional value 1.25*16???

I’ve got the same figures)

How was the additional value calculated for the company in the first question??

The paper was not bad and was a fair paper in term of covering the course but there were issues in my test. Like my test was not loading initially and invigilator asked to restart my PC, then when I relogged and signed in from the start to the end I had issues with the font. However, after PC restart and relaunch of exam even they relaunched my test because of font but did not work. Those PDFs or extracts of PDF for the question part not the requirement part was not readable. I have alarmed the invigilator couple of times but did not work later on, even when I was sending a message to them was not getting delivered or they were getting back to me or getting back in about a hour. Like for one of my messages in first hour they got back almost at the end of the test. During the exam font issue made me to copy question data to word processor and read it there however the challenge was that, pasting the data to word processor was not in the same question format and extracting the data and concluding question details was difficult and time consuming. It impacted my performance definitely for numerical part and pressurized my paper attempt, running here and there, attempting this and that to score some mark but not being able to attempt all of the paper. I have struggled with time for my question 3 which was numerical question for the most part of it and ran out of time. If a center-based exam was offered I would not have gone for online test because still it's not offered in a quality, it should be. ACCA is also not considering the challenges and difficulties of the mode of offering and the technology issues the students are facing. However, my test was ended at the end, and I have exited but was not able to send a message to the invigilator to report the issues to ACCA to compensate or if I could reschedule it my paper. Therefore, it was not a favorable setting even attempting more 75% of the paper with all those challenges but my paper may have quality issues. Fingers crossed for a pass, but ACCA need to consider things like this which are beyond students' control. Best of luck to everyone setting Dec 2021 setting, hopefully this setting will add to your new year excitements. By the it was my last paper and if I pass it will definitely add excitements.

yes, mine was negative APV40m+

I can't remember the exact cash and share offer gains, but it was quite low. Maybe around $1, but the share for share was slightly better I think

I agree with this, share for share was better for the target company so I thought it would be the one they accepted. I spoke about it being better that way for the shareholders of the predator company as well because the cash consideration they were offering was a huge amount of the current assets they had. That 2 mark bit at the start of the report was a bit strange. Was it as easy as it looked? I just took 25% of the current assets and liabilities and took that off the price and got a loss?

Hmm....I deducted 25% of assets from the proceeds but added back 25% of the liabilities. Net gain around 2225m I got, not sure if I'm right or wrong though. Were your cash and share for share gains minimal also?

I did the same method but ended up with a 2000m ish loss. Maybe I subtracted all of the liabilities instead of just 25% while I was rushing but what you did sounds right. Yeah I want to say cash gain was around 1200m and share for share was around 1500m, that's for the target company shareholders, divided by the number of shares the target company had pre-acquisition (1200?). I got the total gain on acquistion to be about 5200m so I figured the gain to the parent company was the total gain less the 1200m or the 1500m.