FM*** F9 June 2014 Exam was.. Instant Poll and comments ***

I didn't like this F9 exam. There were better F9 past exams that I saw. I hated the project specific cost of equity 4 mark calculation. And the useless question of 2 (c) of comparing current assets positions between 2014 and 2015. I just wish to pass. Hope I do, fingers crossed!

TERP - $9.2m needed plus issue costs $0.2m = $9.4m Existing MV is $56.4m or $4.70 per share (12m shares in issue) I worked out a 6 to 1 rights issue. ($56.4m : $9.4m) 6 shares at $4.70 = $28.20 1 new share at $4.70 x 80% (20% discount to market) = $3.76 Total is $31.96 divided by 7 shares gives TERP of $4.57

i also inflated the same way by (1+i)^n and got overall got negative NPV which means project was not acceptable on financial grounds

i thought my WACC question went well but judging by the comments here most of them are saying 12-13% and i got 11% !! I am in trouble now :P

I made it a 4.8 to 1 rights issue but I haven't seen one that wasn't a whole number before. I checked over & over it but I couldn't make it equal a whole number. I then calculated 2 TERPS, 1 for the investment (including issue costs) which came to $4.54 & one for making it a 4 to 1 rights issue and raising more than the required investment.

pakistan098, I had the same mix as you for the projects. The NVP of E was going for sure to be negative since it was stated that1) it was going to be undertaken for strategic reasons and 2) we had to assume a 0 NPV to continue with the other parts of the question. If it were positive than why to use 0?? At least that was my logic when first reading the question. It was not a difficult exam compared to some mock exams I tried yesterday, and I think this was the reason for making it almost impossible to finish all questions in the time provided. I am good in time management but this one was tough. Good luck to all and enjoy summer now, till results time :)

@pringo Time was enough if you know how and what to do. yeh practice was important.....

I am hoping that I got most of my marks in Q1 & Q2. Ran out of time in Q4 was half way through TERP and didn't get to part D. I think that it was better than Dec 13 but was quite time pressured. The only other part I left out was Q3 Part 2 I hate the de gearing business and couldn't be bothered thinking about it for 4 marks!

yes, yes, me too, 48 negative for Project E (that's why they offer zero in next part of question), but my total NPV was 3050.

Q in which wacc was required the cost of debt was 4.4% the ke was 10.3 and the mv of equity was 75 and mv of debt was 15 which gives WACC 9.32 %. and if we assume that the Mv of the debt of target co is after tax it would gives us project specific cost of equity = 12. some thing ...

I have the exact same figures woww @ pakistan098 but by reading the comments I thought I did it wrong....

we needed to choose project D because it had the higher profitability index. @Bryon I am happy you found the F9 paper good but for me it was not exciting. There were better past F9 exams that I've seen. Good luck for your results.

In Q1 I think the NPV should have been negative as in the next Q part they said assume the NPV for Project E is 0. WACC was 9% 10.3 x (75/(75+15) + 4(ish) x (15/(75+15)) Beta was 12.6 4% + 1.226 (11% - 4%) TERP I used the wrong figure so got $4.56 (hopefully did the right calc though) WC days I got 110 for 2014 Quick Ratio I got like 0.95 so may have mucked that up.

I also got Kd 4.4 & Ke 10.3 with MVs 75 & 15 but I think I might have made a mistake after that in my WACC because it came out higher. I couldn't go back over any of it cause I wasn't well enough, just glad I got through it without having to dash out to puke lol!

Woo I got a negative NPV too! For part b) I didn't have to apportion any, I ignored project E because the NPV was assumed to be 0 and using A, B and C gave me the highest NPV (even though D had a higher ranking).

@Byron - I calculated the total NPV with projects B, C & A and then again with D, C & A and the total with project D was definitely higher.

@rahee but we must take the project and only use the remaining 5000 on the other project.

Yeah W.C was 110 days but I got quick ratio 1.1 something like that

Mutually exclusive meant to me you had to choose either. I went for highest Pi index and excluded 2nd best. I ran with remainder and had saving of initial investment. Negative npv 2nd question using ratios nice but time consuming resulted in higher overdraft and payables to be funded. Aggressive policy in place. Q3 was nice. Wacc was grand. Degear and regear was con. Cant remember partc but share hypothes wasnt bad. Q4. Asked eps div and share wealth said 1st two no and last 1st yr yes and last yr no due to static div policy. Terp lovely question included costs cos had to be raised. Last part sources made poor attempt cos of time

It stated maximum NPV, so I did A, B and C, but I wrote a comment on why I was taking B over D.

I've just remembered that I left out efficient market hypothesis to go back to but didn't, can anyone remember how many marks that was? I have a feeling it was quite a few!

@Byron - yes I did :) So all of projects E, D and C and $500 of $2500 investment in A (ie 20% of A)

I have to say for non english first language speakers mutually exclusive is very unfair. Me and colleague had different interpretation and we speak english as first language though perhaps not well.

Learn Islamic finance terms parrot fashion they said. They will definitely be examined every sitting they said.............

Why would you consider project e since npv is zero

@tallaghthoop - because they have to invest in that one so although the NPV is zero it still uses up $5m of the available $10m funds If you ignored it but then only used $5m to capital ration then you would've got the same total NPV :)

Oh no! just realised i put external hedging techniques instead of internal! can anyone remember how many marks that was for?

q5? there was a Q5 as well? :P just kidding Objective 1 wasnt achieved, Objective 2 was achieved in 2014 and Objective 3 was easily achieved in both years!!

@kuzco - only 5, not so bad :)

Its last on list in anycase that part of question has five marks three of which is Pi index and ranking thats the key part to question. Sure part c has 6marks for rationing discussion?