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For the working capital in the cashflow, I thought it mentioned 10% of the sales figure in the yr, paid at the start of the year, as each yr of the cash flow is representing info at the year end, I included the 10% of sales of yr 1 in yr o, 10% of sales 2 in yr 1 etc. this then would mean the final full amount of the working capital would be returned in the final year 4 and nothing in year 5! Not sure if that is correct???
There was no mention in exam whether the working capital will be recovered in end or was there any? :O
Does anyone know how long it will be before ACCA put the paper and suggested solutions on their website?
Overall I thought the paper was so so. Could have been better but could have been worse. Q1 a&b I didn’t get the same answer, I think the reason for this was that I used the tax benefit on the capital allowance at it’s monetary value instead of deflating it to it’s present day value.
Q2 & Q3 were fine. But I got 12% on 3a (cost of equity using DGM) where others seem to have got 13% so maybe I used an incorrect dividend value or something :-/
Q4 was my worst by far. I was unsure of what discount rate to use in my calculation. I felt that using 7% would have been ok for the buying option but the same rate could not be used for the lease because the cost have capital may have been different to the 7% bank loan?!
Advantages of leasing was an ok question. The short maturity vs long maturity rate on debt was a bit of general knowledge as opposed to textbook knowledge learnt for F9, I just spoke about uncertainty, speculation, government policy and security backed debt.
@umerkhayam I really never read the comments because they confuse me… usually everyone says something and you are never sure who is right and who is wrong so i ignore all comments… also when Mr John provides the suggested answer I don’t check it.. I just leave it until I receive the results…this way is better 🙂 I don’t like to discuss exams, they are history!
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Don’t think it mentioned when working capital will be recovered but the usual working is to always assume the working capital is fully repaid in the final yr of the project as far as I know???
I used the same approach to working capital as @lauraxxx
The working capital had to be invested at the start of the year, which is the same as investing at the end of the prior year. NPV questions assume that the cash flow arises at the end of the year s it wouldn’t be correct to have 10% of yr1 sales in yr1… At least that’s the way I read it.
I also recovered the working capital at the end as there was no suggestion that a repeat investment was going to be made and so the working capital would be recovered at the end of the current project.
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So glad to hear that @alex!! Wasn’t 100% sure myself and hadn’t seen this way mentioned!
@Mahoysam Its okay to an extent but self-check is necessary, well lets see whats going to happen. I don’t want to blame my self again for not giving it enough time :/
Lauraxxx I read it in some exam report that when it is not mentioned whether they are recoverable or not, students will be alotted marks regardless they recovered it in end or not.
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Ah that’s good to know!! Win win situation! Thanks
@umerkhayam… Believe me, there is no use of self-checking 🙂 and we have got around two months to wait until we receive our results! So why should we check now and start worrying about stuff, it isn’t gonna change anything! Just forget about it and if F9 is the last exam, enjoy your time! I am so enjoying the fact that I am free! 🙂
Hi guys, f9 exam question 1 …. The sales inflation per year of 1.047 do you x by sales each year… Or someone tells me 1.047 power 2, 3, 4 ? Can someone tells me ?
I forgt to tick the number of questions on my answer booklet but I wrot all the 4 questions is that mistek going to cost me?
@Mahoysam Haha, i just can’t. Cause i already failed these two once. Plus you won’t me see here anyway i’ll disappear in a day or two. I wish they could announce results a bit early so that we could plan better.
for year 1, sales x 1.047, year 2 3 and 4 you need to power the 1.047 to 2 3 4 respectively
How did you calculate CAPM-project specific rate, need to ungear to get asset beta of the other company?.. and then regear with the same proportion of equity and debt as the other company have or take this proportion as shown by wacc (market values)?
i did only incremental wc and i made a note where i would have recovered it all at the end but then i recall of seeing this kind of exercise somewhere and did not recover it in year 4. so year 0, as far as i remember was 131 which when calc tax i would have had a tax benefit in year 1 of 39 in year 2 the diff was (20), year 2 i believe it was negative again and in year 3 it was nearly 240 dont remember exactly and as i said i remembered seeing a question like this going from negative to positive and didnt recovered at the end but im not sure if i am correct
@ala what i did in specific project discount rate is that i calc the asset beta by using 75% equity and 25 % debt and than used the MV values of our equity which was 8000 shares x share price and the MV of the bond 5000x 103.42/100 something of 5100 and something and used these two values to calc the equity beta
For question 1 part b, should we inflate the sales rervenue and costs?
In that part nominal cost of capital is converted to real cost of capital, 7%@GT0707 in Q1 part be you are using the real rate of interest meaning deflating cash flows but since the cash flows were before taking in consideration inflation than you are supposed to use those cash flows sales-costs and discount @ 7%
@kriselda Thank u
I did that incorrectly, i inflated cash flow and also used real cost of capital, i hope to get atleast a few marks on that part
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