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

Yes I did inflate them

If you had the BBP rev kit question 44 was similar to that NPV question. And that’s exactly what I did

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%.

@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.

I don’t think you’re correct my friend.

@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%.

Oh i got my mistake in NPV question.. damn I start tax allowance from year 2 🙁 I wonder how much I will lose 🙁 DAMN STUPID

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

That’s almost what I got exactly!!

@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.

You raise everyone by inflation as is case in every mock question ever written! Including fixed costs as advised. How else could you use nominal rate without doing that?!?!

@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?

See I initially got 10% cos I included reserves, then thought it looks odd so took reserves out!

@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 (1×0.047)^n

No, that is 100% wrong.

Why would you do 4.7 +4.7?!

Year 1) 3 x 1.047
Year 2) 3 x 1.047^2
Year 3) 3 x 1.047^3

to the POWER of 2,3 and 4, not times by

I had benefits from discount too. Only thing I disagree is with discount given earlier by someone. From memory circa 28.8m X 5% X 0.75 as only 75% of customers taking it up.

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….

Any other MCQs?

How about some mcqs? Some very hard ones and a few gifts in my opinion?