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i mean you also should recover the working capital in year 5, as the working capital is 10% of sales revenue, and in year 5, there’s no sales revenue, hence, the working capital in year 5 is 0. so other than year 4, working capital in year 5 also should be claimed.
I got WACC of 11. something 😀 cost of equity of 13%, Leasing was cheaper and the buying option was like worse it had much more cost when compared to leasing, my net savings in EOQ question were like 200, and npv was highly positive as well
Damn, that’s where I made my mistake. I knew it looked daft.
Had the working capital outflows in year 1-4 and the inflow in year 4, too.
Ugh.
In question 2, last section, we had to discuss the traditional theory and Miller and Modgliani model right?
Don’t you’ll think Q4 part a) for 10 marks was really easy???
Like it was simple NPV and leasing was lower like 677000something and buying was 745666 something. I thought 10 marks for just that was too silly,,,,
multiply by 10% of revenue for yr1 and deduct incremental amount in yr2 and yr3 and recover w/capital in yr 4
@kaish yes i discussed about the traditional, MM and pecking theory, and somehow relate your answer on how it can maximise the value of the company (longest part to explain, it took 2 full pages to explain)
On the read through in the first 15 mins I thought “yep this looks straightforward enough” and then when actually doing it, it was impossible. Lots of hidden info or info you had to work out yourself when normally you would have been given it.
I didn’t even attempt question 1b or the last two parts to question 4 so that was 17% lost right there. No way have I passed. Soo annoyed.
@Kaish yes you’re right.
@kaish yes thats the one!!!! As company gears up wacc decreases and al that.!
What was the written for Q3, Aside from objectives? I mentioned conservative and Moderate…. wasn’t sure.
Nice nice. I hope I pass all my 3 papers. Well, catch you all in June. No one talks of question 3. Real easy I guess.
The project specific cost of capital was around 8% right? Also did anyone mention about equivelant annual cost in q 4? didnt have a clue about the short v long term leasing.
How were people with Islamic Finance? I was hoping it wasn’t going to come up, but I had an inkling it might, and I did some last minute revision just in case!
@clevergirl the objective of working cap man. is focusing on profitability and liquidity, explain on those, and a balance between both is needed(once tested in past year)
@alaw my capm for the new venture is 8.45%.
@neilsolaris i read about riba just 1 hour before exam. i was lucky, i and took islamic studies as an extra class. hope i answered that question wellOkay, I did write all that but it was 7 marks so added conservative and Aggressive as well.
Oh well, It was okay paper, No business valuations 😀 Let’s hope we all pass this one 😀 Good luck and look forward to February!
@nizarsalleh i wrote about how managers should keep it on a check to avoid over trading and over capitalisation and i wrote about importance of it.
Well just want to confirm the settlement discount bit part. What I did is that i calculated the current purchase cost which was something like 450000 units * $1= $ 450000. Then I calculated the cost of purchasing under discount which was like 450000 * $1 * 99% = $445500. I then calculated the cost of financing the reduction in Payables on the basis that if the firm reduces its payables balance it would have have to finance this reduction. Did any one else do like this. Does this makes sense?
@hassanatcams I did like 99%*450000*30/365*15%
@neilsolaris and of course you answered it well too, i met you before in the ask f9 tutor forum, asking about the working capital.
i think as long as you write something, the examiner will grant you marks, my answers are just based on what the suggested answer by the examiners before (as the question on obj of working capital management has come out once before) .
can’t confirm about the early settlement, because i was in doubt, maybe @neils of @clevergirl could explain their solution for the question
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