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I found section C super easy, I was hoping to get these type of questions. But I found A and B section difficult, many multiple choice questions and I think there was a lot of pure theory.
Yes, totally agree. Section C was ok – had wacc calculations and lease vs buy.
Section A and B – few questions pretty straightforward but the majority theoretical and difficult..I honestly found this exam easy compared to the last one ( which I failed 48). Section C was WACC calculation, NPV and some capital rationing and theory about Capital Structure and WACC relationship. Found section C not hard at all.
Section A lots of theory, which wasnt difficult but VERY TRICKY. On Section B I got early settlement discount question which I found the most difficult to solve.
Overall found this exam OK.
Agreed that section A and B were tricky. I didn’t manage my time well and had to skip some section C parts. Does anyone remember the marks allocated to each question? I think the WACC calc was 10 marks, what was the lease vs buy?
Please I forgot to include the currency sign in my computations in section C. What is the implication of this?
The weighted average cost of capital question included ordinary shares pref shares and loan notes and the market value came out to 25000M for ord shares 500M for pref shares and 19000M for loan notes my wacc was 10%
The lease vs buy can anyone tell which discount rate they used they gave us 2 wacc and before tax cost which was 10 % so i used 8 % after tax cost of debtLease vs buy was 10 marks wacc was 10 marks 4 marks for stakeholder ojective and management
6 marks for public issue rights issue and placing
4 marks for lease advanatge over buying
And there were four marks for the circumstances whehn we can use the current wacc in the new proposed projectI think I got same section C question as you.
I also got WACC at 10%
Lease vs buy- I opted for lease, costs were lower. What did you get?I hada question. The first section A. Company paid last dividend 4 years ago of 12c and just paid a dividend of 17c. Cost of capital is 11 percent. What’s the current share price? This threw me. I spent time on it, calculating growth every way I could think of, but couldn’t come to their answers. Anyone else have this? It’s still bugging me …. Please if you solved this tell me how!?
yes i got this aswell i struggled at this question for a bit then figured it out i think the answer was 9.27
the way to do this was finding the growth by (0.17/0.12)^1/4 -1 which gives u 0.09098 something now rounding this incorrectly can give u two answers which were in the options i calculated by using 0.09 and ignoring the rest of the decimals as they were giving answers which were close to options but different but 0.09 got me 9.265 which is closest to 9.27 and so i used that.
the formula for share price was (0.17*1.09/0.11-0.09) = 9.265 or 9.27Im confused nobody got NPV and ROCE of 2 projects in 1st Q of sec c?
and Rec and factoring offer calculation in 2nd Q of sec C?
i messed up my increase in contribution in receivables and the bal which the factor advances and charges int of usually bigger than overdraft rate i confusingly added to the calculation rather than deducting it. can anybody tell how many marks will i lose from this? rest the comment and all other calcs in 2nd question i believe i did right.Also did anybody get a question which asked EAC of investment costing 360000 for and 56000( not exactly this but around this) was PV of future 8 yr cashflows. and cost of captial was 20%
and it was in perpetuity. i simply divided the pv of 8 yr cashflows 56000 or more by 20%. is this right or wrong?Section c
Had 10.8 in WACC, think I calculated the MV of preference shares incorrectly which is why I got 10.8. Thought the stakeholder management theoretical element was strange, WACC theory q was fine.NPV Lease vs but was fine but I stupidly calculated EAC after that and therefore chose purchase. Anyone know how much I’ll get penalised for that? Probably 2 marks due to the incorrect discussion? Rest of it I can’t really remember but nothing too bad.
Section A
A lot harder than previous examples. Very theoretical based and some were just quite strange. Notably, who cannot use money markets, government incentives for SMEs for funding gap, tough profitability vs liquidity tick box, government assistance question, and tax allowable depreciation being paid at the end of the year in which it arises. Quite tricky to be honest, definitely lost a good few.Section B
Tough as imagined, especially the business finance case. Replacement value, earnings yield for the competitor were tricky.Thought it was quite hard but think section C may have helped to build up a good bank of marks.
Hi, I got the exact same questions as you for Section C, Project E- has the operating profits written, I remember my NPV was positive $ 4700+ ish, and ROCE more 20% Project M’s NPV was $ 10000+ ish, and ROCE lesser than 20%. The investment criteria stated that the project has to satisfy ROCE of 20% over and have positive NPV at cost of capital of 10%. The 2nd part of question was to ask which investment project to take, I wrote only Project E since it satisfy both the investment criteria, but I also wrote that general NPV rule was to take any positive NPV project, especially one that is higher NPV. ( I remember reading that capital was not rationed.) For factoring costs, I think I messed up my calculations as well. Is this what you get as well? What do you remember about Section C questions?
Britneylim wrote:Hi, I got the exact same questions as you for Section C, Project E- has the operating profits written, I remember my NPV was positive $ 4700+ ish, and ROCE more 20% Project M’s NPV was $ 10000+ ish, and ROCE lesser than 20%. The investment criteria stated that the project has to satisfy ROCE of 20% over and have positive NPV at cost of capital of 10%. The 2nd part of question was to ask which investment project to take, I wrote only Project E since it satisfy both the investment criteria, but I also wrote that general NPV rule was to take any positive NPV project, especially one that is higher NPV. ( I remember reading that capital was not rationed.) For factoring costs, I think I messed up my calculations as well. Is this what you get as well? What do you remember about Section C questions?
I forgot to add scrap value when calculating the TAD 🙁 really really silly mistake, maybe cuz of the exam pressure. Hope I pass!
Btw for wacc question do you remember for convertible loan notes the question said 15 shares for $100 nominal value. What did it even mean? I couldn’t understand it but I just assumed it’s 15 shares for each loan note.
Exam pressure was too much maybe because section A and B were quite tricky.
In lease there was written full tax relief i dont know what that means but i assume we had to take out tax savings from interest payments as 100000 × 20% = 20000 like we normally do and i think i got buy as cheaper option
Both answers were above 250000 buy and lease
There was an mcq if anyone remebers
It was about the non divisible project where one project could be repeated several times the answers were
98000
91000
84000
100927 somethinh
And the capital was rationed to 154000
My answer came out to be hughest as 98000
There was another mcq where it was about liquidity and profitbaility and had 4 choices
I assume where dicounts were taken were regarded as being profitable and selling things on dicount to remove inventory was liquidityIn wacc wuestion if anyone remebers that while calculating cost of debt i didnot choose the redemption value of ordinary shares because it came out to be 85 where as the nominal value was higher as 100 so i choose 100
Cost of euqity was 13
Cost of pref shares 6
Cost of debt 6 [using irr]I got 98000 too.
The other question you mentioned I am not sure about the early discount but for inventory I selected liquidity too.Do you remember if we were to add scrap value in the buy options TAD calcution?
My A QS were quite difficult also like first two in gov assistance and other theory ones I was unsure off. In section B I found the business valuation one hard and I think I guessed a lot of the answers. My First section C was just a lease v buy and I think. Buy was the cheaper option based on my calcs but this was after redoing it I got lease as the cheapest first so not sure, then a q on two reasons other than financial why leasing is a better option than buying and another written one one on the same facts as the lease v buy and the managers wanted to buy a cheaper alternative machine which was less environmentally friendly on the basis that their primary motive was financial profit discuss! I think it was 10 for calc, 2 for benefits of leasing and 8 for that last written one. The next question was on WACC and I think I got 10 for that. Then a question on raising finance via rights issue, placement and public offer. I think that was a six mark and I could only write a decent issue in the rights issue! Then a question on something to the effect when would WACC be appropriate to use when appraising projects. Again I think I wrote a lot but not sure if I hit the nail on the head for this one. Hoping for 50. Anyone considering AFM?
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