*** F9 June 2011 Exam was … Post your comments here and vote in Instant Poll ***

Q1) Investment Appraisal with inflation, Capital allowance + Working Capital
Q2) Calculate WACC before and after bond issued and comment findings
Q3) Ratio analysis- achieve maximising shareholders wealth or not
Q4) Money Market vs Forward Contract
Compare with spot topic :
1.Working capital-Miller Orr, cash budget, receivable
2.Right Issue of shares/foreign exchange risk management
3.NPV with inflation and tax
4.WACC cost of capital wiht CAPM/Calculation of beta
3 out of 4 spotted correct.
Not so tough compare with few year sittings

WACC and investment appraisal can be found in every paper… so it’s not a big deal to guess them…
and foreign currency hedge was 100% as in the previous two sitting this area had not been examined.

@princefury007 said:
it was a fair paper but was really time pressured!
q1 used money rate and inflated all from 1st year
time horizon of 4 yrs. left it undone
risk incorporation , i talked about the the meaning, procedures, adv and disadv.of sensitivity, expected values,and adjusted payback

q2 b4 bond issue i got wacc 12% after issue i got 11%
factors influencing mkt value of traded debt. i talked about the expectation theory, liquidity and segmentation theory. i also talked about the level of risk involved, size and type of bond etc

q3 13 marks did not get time to do it
but did sale and lease back and equity finance raising.talkabout wat they are and effect and disadv and adv
explained nature of script dividend and its effect and adv and disadv

q4 did the forex change calculation and think money market was cheaper than foward rate
for int rate and exchange rate i talked about purchasing power parity theory and interest rate power parity theory
for the inventory did eoq normal without discount at 120000units p/y and then did 30000unit with discount .. 120000 was cheaper.. didn’t do the receivable part
i only hope i have done enough to pass! cos timing was challenging. and i also hope there will be mark for steps even wen i make mistake, i hope i get subsequent marks

@princefury007 said:
it was a fair paper but was really time pressured!
q1 used money rate and inflated all from 1st year
time horizon of 4 yrs. left it undone
risk incorporation , i talked about the the meaning, procedures, adv and disadv.of sensitivity, expected values,and adjusted payback

q2 b4 bond issue i got wacc 12% after issue i got 11%
factors influencing mkt value of traded debt. i talked about the expectation theory, liquidity and segmentation theory. i also talked about the level of risk involved, size and type of bond etc

q3 13 marks did not get time to do it
but did sale and lease back and equity finance raising.talkabout wat they are and effect and disadv and adv
explained nature of script dividend and its effect and adv and disadv

q4 did the forex change calculation and think money market was cheaper than foward rate
for int rate and exchange rate i talked about purchasing power parity theory and interest rate power parity theory
for the inventory did eoq normal without discount at 120000units p/y and then did 30000unit with discount .. 120000 was cheaper.. didn’t do the receivable part
i only hope i have done enough to pass! cos timing was challenging. and i also hope there will be mark for steps even wen i make mistake, i hope i get subsequent marks

how did you calculate ke?

@ibukunoni said:
@ tzxsean. You such a funny chap. Nice memory too.

The paper was quite easy, not too difficult I’d say.

I attempted all, hoping to get good marks in Q1 and 4 and full mark in Q2. Didn’t do too well in the first part of Q3 but attempted the other parts.

Lest I forget, I should be off now!!!… got to study for F7 tomorrow…see y’all

wad made u think tat im funny?

@ibukunoni said:
@ tzxsean. You such a funny chap. Nice memory too.

The paper was quite easy, not too difficult I’d say.

I attempted all, hoping to get good marks in Q1 and 4 and full mark in Q2. Didn’t do too well in the first part of Q3 but attempted the other parts.

Lest I forget, I should be off now!!!… got to study for F7 tomorrow…see y’all

So what was answer for Q1 – the NPV?

Also what about the exchange rate question. Was the forward hedge better.

@tzxsean said:
nope…the formula is not wrong…
when we use perpetuity formula..what we get is the estimated amount of cash inflow we will receive through the life cycle.

in order to evaluate business value, the cash flow amount we derived from perpetuity formula will need to be discounted to PV and sum it up with other PV to get NPV.

i know this is abit ouf of topic and it’s pointless to argue over this, but trust me on this, that formula for perpetuity is used to calculate the SUM of DISCOUNTED CASH FLOWS to infinity from YEAR 5 onwards. i did some higher math classes so i know what i’m talking about.
if you don’t believe me, go take out your microsoft excel and experiment yourself, discounting year 5-100 using the same cash flow, add them up, and then compare it with the figure you get using perpetuity formula

Edit:
try putting some thought into it – if you do not discount the cash flow every year, the cash flow will NEVER converge. in other words you will have infinite cash inflow if you sum up to year infinity.
e.g., you get $1 every year, if you get it every year to year infinity, you will end up with cash inflow of $infinity, hope you get what i mean…

Personally think theory is weighs heavier than the calculation. The 3rd question was a disaster

Questions was fine..but time management and retriving memory was difficult..hope for 50 but it all depends on the kindness of the examiner..

dear all

if you make a silly mistake such as copying an incorrect number and the method used in the question is correct,even the formula used, is this type of mistake have alot of weight in marking. thanks.

silly mistakes from my end were: inflating vc and fc incorrectly..copying incorrect number etc

The more I write the more blurred my mind is. Can’t recollect what I wrote. Only remember I counted my marks yet not enough to pass : (

in simulation anaylsis if you say that it is based on what if scenrios and the possibiliy of different outcomes. is that correct? i think in q1 part c if you mention the three different types you will get 1 mark and defie another 1 mark am i right?

@mschembri said:
in simulation anaylsis if you say that it is based on what if scenrios and the possibiliy of different outcomes. is that correct? i think in q1 part c if you mention the three different types you will get 1 mark and defie another 1 mark am i right?

Q1(c) – the 3 that I mentioned were Sensitivity Analysis, Expected Values and Simulation. Simulation is like sensitivity analysis with the difference that “what if” happens to various variables at the same time. I think there will be 1 mark each if you mention any 3 and an extra 4 for definitions between them.

@joevassallo said:
Q1(c) – the 3 that I mentioned were Sensitivity Analysis, Expected Values and Simulation. Simulation is like sensitivity analysis with the difference that “what if” happens to various variables at the same time. I think there will be 1 mark each if you mention any 3 and an extra 4 for definitions between them.