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it was a fair paper, but i didn’t manage to get the same NPV for question 1 a and 1b. i get a slight difference? anyone having a slight difference also in the net present value? but i got some same present value in year 1 and 3 i guess
Hi Guys,
do you know how the Q4 (a) was to calculate? It was a question for 10 points leasing vs loan. It was too less data given and could not identify which method was to apply to calculate sum of leasing payments….
Thanks a lot for your feedback!
I got a slight difference too, but I thought I was meant to! I can’t see what I did wrong otherwise.
I thought the paper was much easier than I expected, but I hope I’m not tempting fate by saying that!
i solved that question by calculating the net present value of leasing and also purchasing the machine outright. using the financing cost which is 7% as discount factor.
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I thought the same thing… 🙁 Didn’t understand how to solve it 🙁
For question 4, I just worked out the leasing costs, and then worked out the buying costs, and then stated which was cheaper.
ya, neilsolaris, i remember i did that type of question before and i get the exact same amount of NPV. i spend 15 minutes rechecking where did i went wrong, but i simply can’t find it, so i managed to continue with other questions. Manage to complete all 4 questions. Hoping for 70++ or perhaps 80
The question had 10 points. It should have been something sophisticated.
And they asked to explain the method. I think it should have been s specific approach to it.the leasing was cheaper right, about 600K++ and the purchasing was 700K++ can’t remember the amount but i know it starts with 6 for leasing and 7 for purchasing
and the early settlement discount(ESD) was quite tricky, this time it’s where to give ESD instead of whether to accept the ESD
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For the leasing question where did you let get the discount factor from?
I found question 3 tricky on the buffer stock
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It was manageable, the paper pertained the followings EOQ, buffer stock, npv cash flow calculation both on real and nominal cost of capital, asset beta factor, lease and buy and a lot of theory
I calculated the leasing option as being cheaper too. I didn’t elaborate about my method (I forgot to), but I just mentioned that the leasing was cheaper and so was preferable. I think I might have mentioned that a pre-tax discount factor was used because tax was not involved. Other than that, I’m not sure what else could be said.
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For q1 was it correct to inflate part a and not inflate for part b?
Yes I got that with leasing and that was the best option as it was cheaper.
For question 1 part a) I used 12% as discount rate and B) I used 7%.
Did anyone get WACC as 11.24?%
Also for question 3, can anyone remember what they got? I did 12xorder price.
the 7% of financing cost. it’s stated in the purchasing option, it is the same as the question in ASOP Co, where you only take the financing cost as ur discount factor
@nizarsalleh: I did the same but maybe have chosen the wrong discount factor.
I had 155K*4years annuity for 7% for leasing.
Ok guys, it does not matter anymore.
lets hope for the best 🙂7% for real discount rate is what I think I used (I’m no good at remembering numbers!). Basically, I calculated the real discount rate as 1 + mominal rate / 1 + inflation rate.
I also did 12 x order cost for the first section. For the EOQ it’s something like 300,000 / EOQ x ordering cost.
I got thrown off with a Market research bit and so i put (200,000) in year 0 and (2000,000) in year 1. Not sure but I hate positive NPV!
I got a different NPV under a and b. i think i made a mistake when I calculate the rear rate of return. I took a nominal rate of 12% rather than 17%. accordingly i arrived at rear rate of 7% but the correct is 8%.
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