FM*** F9 December 2015 Exam was.. Instant Poll and comments ***

@evilozfon said: in npv calculation how did you guys inflate the S.P and costs by :- 1) 4.7% + 4.7% for second year or 2) value x (1.047)^n which did you use?

@misschile100 said: What do you mean? They said the figures increase each year by general inflation rate

@misschile100 said: What do you mean? They said the figures increase each year by general inflation rate

@genty said: You only inflate it if they have given specific inflation like, ' inflate Sp by 2% every year' in the q. I guess. But din't worry you'd probably get marks for it get stuff like taxation.

@mjmj said: don't think so

@chris165 said: Q1 38.5% after debt issues it increases to 56% or something. Q2 Benefits: Increased profit from extra sales £480k. Reduced bad debts 12k Costs: Discount: 108k Admin: 35k: Finance: 32k Net benefit $317k Q3 FRC: 355kish, MMH: 358kish, leading: I took this to mean waiting for a good opportunity to exchange the money as in the leading and lagging technique so no numerical answer just risky. Q4 NPV just over $1.5million Sales = multiply units sold by 5.65 then by 1.047^n for inflation where n is the year VC = multiply units sold by 3 then by 1.047^n for inflation where n is the year Tax = 27% one year in arrears so this appears in year 2 to 5 (whereas sales and VS in 1 to 4) Investment 1.5m year 0, 200k disposal year 4 Capital allowance savings go in years 2 to 5 same as tax. Working capital: Just incremental part so first year 150k*1.047 - 150k; year 2: 150k*1.047^2 - 150k - yr 1 amount. etc I think the flows were all 7xxx or 8xxx Discount at 11% Q5 WACC before 10.9%, after 10.3%.

<a href="https://opentuition.com/members/chris165/" Q2 Benefits: Increased profit from extra sales £480k. Reduced bad debts 12k Costs: Discount: 108k Admin: 35k: Finance: 32k Net benefit $317k Q5 WACC before 10.9%, after 10.3%.

@dreamscars said: i got 1,122,000 as answer. the figures are kinda too perfect, guess something went wrong.

@genty said: You only inflate it if they have given specific inflation like, ' inflate Sp by 2% every year' in the q. I guess. But din't worry you'd probably get marks for it get stuff like taxation.

@alexanderrobert1989 said: Debt:Equity question trumped me? Debt: Market Value of Debt Equity: Reserves and Mv of ordinary shares How could a company with such high levels of equity to debt, be showing 30% gearing levels>>? Missing something here. How did people calculate the profit on the back of the 25% increase?

@evilozfon said: in npv calculation how did you guys inflate the S.P and costs by :- 1) 4.7% + 4.7% for second year or 2) value x (1.047)^n which did you use?

@evilozfon said: I inflated them like this lets suppose s.p is 3$ in current price terms and inflation is 4.7% per year Year 1) 3 x 1.047 Year 2) 3 x 1.094 (which is 4.7+4.7) and so on for next years.. is it correct? or i should've used (1x0.047)^n

@alexanderrobert1989 said: That's what I did initially, but reserves have always been in the Debt Equity calculation so stuck with it? Even before the new debt of only 10m and taking book values the company had a much greater amount of Equity then Debt?

@sobieski said: I messed it up a little... A just skipped the first question and forgot about it. when revising the questions I realized I skipped it! In the last 10 minutes tried to write anything...however...i think 10 mark are lost. The question was not so hard, though... The hardest for me was the 5th.. On the multiple I got: 1. B 2. A 3. A 4. A 5. B 6. D 7. D 8. C 9. C 10. D 11. A 12. A 13. B 14. C 15. A 16. A 17. B 18. B 19. A 20. A too many "a"s....)) Q 1 - as said above - said only about the semi strong market. skipped the IRR for redeemable debt...calculated the ratio without it.. Q 2 - I got that forward was cheaper... You borrow dollars to buy pesos to put in bank and at the maturity you just pay the supplier.. b) it was about futures (almost confused it with forward) - it is cheaper, can be sold on the market, are not obligatory, though not so flexible.... Q 3 - The discount policy is to be chosen - it brings benefit to the entity. I included the 10% profit margin for the sales volume difference (i guess was 20% increase in credit sales). If you exclude it - it is negative. It wrote that it shall be included, as the competition is fierce and the above profit is opportunity cost if not used... b) About foreign clients - Wasn't they asking about credit risk and not fx risk? I wrote that the best was to diminish risk is to ask for advance payments / to have a bank as an intermediary and to get a good credit risk department if the main business is export based.. (if it was about fx, then I'm screwed) Q 4 - The sales price / cost shall be inflated starting with the first year. Fixed cost not inflated. Included the wacc movement only (no initial balance). Tax calculated on depreciation. Got a positive NPV. I wrote that they must consider maybe a better machine, as the last two years it was working on full capacity (400,000), so maintenance costs could get up as well as maybe some oportunity costs could arrise... anyway, not important. b) the term just got out of my head ....said "hard and soft limitation of financing" instead of "capital rationing"...hopefully the characteristics are correct and will get some marks.. Q 5 - first started with part b, as wacc is my achilles heel... part a - "i have no idea what I'm doing". After I realised I skipped question 1, got panicked don't remember what i wrote.... Hopefully will get good MCQ and 2 / 3 / 4 right and get the pass rate.... It explicitly stated inflation applied to fixed costs!! Any other MCQs?

@bohdan.yaremk said: Dear All, Unfortunatelly, I opened a booklet before it was allowed to do so just to see how it looks like. It was my first time I was taking acca so I was stressed and didn't note that it was not permitted. Unfortunatelly very silly mistake, I know. Probably some of you knows what the cosequence it might have on my final grade ? How many points will they withdraw ?

@dreamscars said: pretty sure the finance cost is benefit right? since receivables have reduced and you saved finance cost from having cash from receivables.

@bohdan.yaremk said: Dear All, Unfortunatelly, I opened a booklet before it was allowed to do so just to see how it looks like. It was my first time I was taking acca so I was stressed and didn't note that it was not permitted. Unfortunatelly very silly mistake, I know. Probably some of you knows what the cosequence it might have on my final grade ? How many points will they withdraw ?

@chris165 said: Actually I thought not because as I read the question, the receivables days remained at 51 before and after the discount. Since the discount led to increased credit sales the finance cost would be greater after the discount. I may have missed something here though I must have looked through the text at least 10 times for a new receivables day figure

@ehsanshah said: Credit discount will decrease Days to 30 for 75% customers.. and overall affect decrease in Receivable

@chris165 said: True but to calculate the finance cost you need to know the number of receiveables days before and after. Just because 75% of customers pay in 30 days doesn't mean average receiveables days cannot remain at 51.