*** F9 December 2011 Exam was: Post your comments and vote in Instant Poll ***

what areas been examine?

what topics?

what topics pop up plz.

Easy Paper!

Q1 – NPV, IRR with sensitivity analysis
Q2 – Working capital management with debt factoring
Q3 – Valuation of companies with WACC
Q4 – EPS, financial analysis and discussion of financial objectives.
The last question was a bit tough but managed and overall did fine 🙂

Was expecting hedging and at least bit of Islamic Financing!!! 🙁
Came out Happy!

how did u calculate wacc in the exam?

well cost of equity was given and for cost of debt i deducted tax and in debentures i use 100 as market value discounted interest for 6 years after deducting tax and then used discounted 100 as redemption was at par value ….. then used irr @ 8% & 13% then used all three rates my final answer was like AROUND 9 % ANYONE GOT SIMILAR ANSWER….

Yes, I got 9%

@ammar-shabbir said:
well cost of equity was given and for cost of debt i deducted tax and in debentures i use 100 as market value discounted interest for 6 years after deducting tax and then used discounted 100 as redemption was at par value ….. then used irr @ 8% & 13% then used all three rates my final answer was like AROUND 9 % ANYONE GOT SIMILAR ANSWER….

Yes I got around 9%

WACC i messed it,didnt have time to use IRR

@annasrei said:
Hi everyone,
How was factoring? I calculated that in both cases: with recourse and non-recourde it is not financially worthwile to use factoring, it is more expensive than currect.I have suspicion that it was not correct. 🙁

When I first calculated factoring, both recourseand non-recourse were negative. So when I moved to part d I realized that we were not supposed to include the interest on 80% as it’s simple recourse and non-recourse administrative services , not financing. Re did and found them both positive, but non-recourse was more benefecial because even though the fee was high, the benefit of bad debt recovery (full) was more than that.

@shadedrose said:
When I first calculated factoring, both recourseand non-recourse were negative. So when I moved to part d I realized that we were not supposed to include the interest on 80% as it’s simple recourse and non-recourse administrative services , not financing. Re did and found them both positive, but non-recourse was more benefecial because even though the fee was high, the benefit of bad debt recovery (full) was more than that.

Yes.. both are beneficial .. but non recourse is more beneficial 🙂

Well when i first opened the paper i was really pleased! There was so much to do though, ran out of time on some bits. Think i am now on a 50/50 footing… 🙁

Q1 NPV ended up with something +104700
IRR came in about 13% so accepted on that basis
Easy to describe what sensitivity analysis was.
Had a mind blank at the sensitivity calc!

Q2 talked about conservative, moderate and aggressive polices and effects they would have on the wc cycle.
got 93 days i think for the working capital cycle
Debt factoring bit confused me… ended up with 2 negative values. Based my answer on what i had calculated and stated the company would be worse off and if unable to source finance from elsewhere then this would be a good option for immediate cash which could be used to service the overdraft debt.

Q3
Net assets was easy enough, 490m i think, or 470.
Div growth model method: mindblank
Earnings method, think i got about 690m

Messed up my wacc and ended up with 10%, was thrown by the pre tax bank rate, i changed it to 4.9% :S

Q4
wrote a lot for the 11 mark section: talked about max shareholder wealth, this being done at any cost previously and now shareholders are more concerned with environmental and social impacts to meet the financial objective, plus agency theory, then spoke about value for money and the three e’s

Q4 Terp =

@sanjarbek said:
How IRR coud be 9 % if at 11% it’s coming to $122,000 ?
mine was 14.1 % I donno 😉

My NPV is $103,000 and IRR Is around 15.8%…. i think its the rounding off effect