FM*** December 2023 ACCA FM exam – Instant Poll and comments ***

I did the same thing. But the second part of the question on real interest and nominal interest was didn't have much to say for 8 marks.

The business valuation question in section B was okay but did it have any calculations? I don't remember any calculations from that question. If they were calculations please remind me.

I had the lease as about 4k cheaper

Thanks Robert, maybe I didn't depreciate the vehicles enough to get the residual value on disposal

What I did may be wrong - that’s the problem with too much analysing after the exams finished - you assume you’re wrong and everyone else is right!

I had the same result with Buy V Lease but when I was checking over my answers I figured out that you weren’t meant to include any maintenance costs for the Lease, the way it was worded makes you think they incur the same maintenance cost, but it says the ‘lessor’ incurs them so the lessee wouldn’t. I wouldn’t worry too much about the end decision you will score marks for inflating sales, variables etc

Also the exam gave a lot of clues to other questions. I had a multiple choice question on the benefits of leasing assets, which then basically answered a Section C question which asked the benefits of leasing! Overall happy with the exam, WACC and Lease v Buy in Section C and money market hedging and valuations of convertible loans in Section B. Things I really focussed on in the days before exam. Section A was always going to be tricky. BPP Revision Kit is essential to passing these exams.

Also got 13% WACC. Around 14% equity, 7% pref shares and IRR of 7.9% for debt. Market value of company was big!

Section C I failed to include Development costs as part of Initial cost although l adjusted them for TAD 25 % .

I don’t think the development costs were meant to be included? If it’s already been spent it is a sunk cost? Not seen it in practice questions but I was on the understanding anything that has been spent prior to the NPV calculation should not be included

Asheimi97 - it was a money market hedge question. They were due to pay the foreign currency so they borrow dollars now, convert it to the foreign currency then place on deposit. In 6 months, the deposit matures which they use to make the payment. You have to work backwards with this one using the interest rates to calculate how much of the foreign currency needs deposited then you can work up to the dollar value. Studied this so much to try and understand it but there were only 2 marks available so wouldn’t worry about it too much

josukegiorno10 - this one stumped me too I flagged it then came back and think I cracked it. You use the year 1 inflation rates and use the formula

My buy and lease question was quite tricky, it was 300k initial investment, and 12k for maintenance that increased 20% 30% and 40%. When inflating these values I’m pretty sure it said to inflate from previous years. So for example 12k the first year, then 20% which made it 14400 for the second year and then 30% of the third year etc

@leep2310, the WACC question did have a big MV, did u use nominal value of loan notes instead of the share option? And with the buy v lease, I remeber the maintenance costs starting as 12k then inflating 20% 30% 40%, this got to me I just froze. But Inflated the 12k by 20% for y2 then inflated y2 figure by 30% plus y2 costs if that makes sense. So annoyed because I missed out a few theory questions due to time and hopefully banking in these two calculation questions or I’ve failed ?

@leep2310 with Section B I had business valuations in regards to loan notes to, but I picked the answer of 93.05 which I think is right. Had an ordering policy question, but remeber putting down 31500 which I couldn’t get my head around and which I practiced so much. What a fail! Did you get anything similar? Also had a money market hedge, think the answer was like 84k approx

@leep2310 yup that question took up so much of my time. I got the first option as my answer but I have a feeling I did it wrong after I discussed it with another person on the ACCA Reddit page. I time apportioned the second-year inflation rate but failed to use the first-year rate.

@junaid98 I agree with you. I also got 93.05 as my answer to that question. I was also kind of disappointed in myself when I couldn't nail down the answer to the inventory question. I was baffled for a while, but I think I got something like 63500, but I believe it's wrong. Strangely, I do not remember the money market hedge question where we had to type out the answer. I remember solving one right after doing the purchase parity theory, where they had given the option. I thought that was easy. Does anyone remember what they chose in their first question of Section A? And also the one where they had to choose increase, decrease, and unchanged options for earning, dividend coverage, and gearing?

Yeah I got 93.05 too because the redeem at nominal was higher than the conversion. There was another loan note valuation question before that too. The ordering policy you had to calculate the EOQ which was 90,000 then work out the current reorder and inventory holding costs then do it again for the EOQ. The benefit was around 70k.

The first question in section A was the creditor hierarchy if I remember correctly. Secured, unsecured, preference shares then ordinary shares. This gave another clue to a section C question about the creditor hierarchy being linked to pecking order theory. Debt cheaper etc guaranteed payment whereas dividends not guaranteed. The increase, decrease and unchanged question was hard. I done unchanged for EPS, increase for profit retention and decrease for gearing

That’s what I put too

@leep2310&@junaid98 I think our papers were slightly different. My business valuation had valuation of irredemmable preference shares given the dividend and cost of preference shares. I don't remember valuation of loan notes. My working capital question had Annual inventory demand as 1800000 current order 300000 holding cost per unit per year $1.00 order cost per order $2250. Current inventory mgt cost was (1800000/300000 × $2250) + (300000/2 × $1.00) = 163500 Inventory cost according to EOQ was 90000. The answer is supposed to be 73500 (saving) The first question on working capital needed the calculation of networking capital. Confirm If these were the sane questions for you.

I got saving as 73500 too but my head went blank and I kept inputting in calculator wrong but eventually got there

@leep2310 I think the first question was choosing the correct options between two independent events that talked about dividend growth rate and cost of equity. Do you remember the answer to the last question of Section A, which had funding gap as an option?

Ahh! I used buffer inventory. That's why I got 63500. Ah well, that's two marks gone.

It’s horrible I felt so confident with this exam revised so much and most of the things I revised didn’t come up no WACC questions no dividend growth no questions on the optimum capital structure traditional theory or the M&M theory even though I had a question about financing with debt or rights issue I wrote about it there just to add in. It has made me so deflated and down as I know I done terribly and this will be the first out of 6 that I fail. Super down about it

@josukegiorno10 your answer might be correct. Our papers will all be slightly different for each person or region I think. My question didn't have buffer inventory. So don't worry. My business valuation in section A had calculating the value for irredemmable preference shares and not loan note like others.

I also got 73500 as saving and got the same questions on working capital!

@josukegiorno10, I remeber something with funding gap and chose that option too, the only option made sense to me

@leep2310, the other loan note question prior to the 93.05 I guessed, I picked the 98 value I think, didn’t have enough time. I remeber there was a section A question where it was tesos to dollars I inputted 1.63 I think it was a confusing question but I’m pretty sure that was the correct value @josukegiorno10 @leep2310 Any chance we can discuss answers on a chat instead of this poll?

@leep2310, For the WACC redeemable shares, I used the nominal loan notes as redemption not the share option? Did u do the same? The buy v lease when inflating the 12k figure this was quite hard, was we meant to inflate 12k by 20% plus the 12 value included. So 12k x 0.2 = 14400 including the 12k value and the same for year 3 etc = 14400 x 0.3 + 14400 = 18720 for year 3 etc