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

Wishing everyone all the best. Inshaa Allah we've all passed :)

Same here. pheww

In question no 1 the $750 fixed costs were incremental meaning that the $750 should be compounded up each year by the compound fraction. An identical incremental fixed cost was included in the June 2013 NPV question which was also compounded up each year it is not just the change in the inflation amount year on year I don't think. June 2013 question/answer as follows: - $250,000 Incremental Fixed Costs with inflation at 5% each year Inflated outflows included in NPV calculation were: - yr1 ($263) yr 2($276) yr 3 ($289) yr 4 ($304) I did the above in yesterdays exam & got $0 NPV for the answer???

@dekerg - I think that your method is correct

Hi - how big was your negative balance - mine was negative but not by much? i did not bother with the answer condisering the fact the project would go ahead anyway due to its strategic imprortance and that's what i put in my answer as well!!

I got npv (1271) .. wacc 9.3 and therp 4.52 ....

I got -tve Npv of $46 as well What about the capital rationing ques- part b? Did you include project e?

I didnt include project E because I got a negative NPV.

on the table the total market value for the equity share for 2014 was given i think about $55m or $58m and the number of the shares in unit was 12000 was given when u divide u u have ur po which was around $55.m/ 12M shares = Mkt price per share of $4.58 so right issue will then be $4.58 x (1- 0.2) =about $3. something i cant remember that was the procedure which i think was right

Its not negative... if you get negative mean you have included fixed cost. In question fixed costs is incremental which includes inflation and charge in full for 1st year and incremental fixed cost in second year. So you wont get negative npv. Its positive npv of 1500k...... if you get negative it does not make sense for capital rationing question for project E

Its not negative… if you get negative mean you have included fixed cost. In question fixed costs is incremental which includes inflation and charge in full for 1st year and incremental fixed cost in second year. So you wont get negative npv. Its positive npv of 1500k…… if you get negative it does not make sense for capital rationing question for project E

i thnink it was ok

Therru. If you look at the past papers, the last time incremental fixed costs came up it was not how you suggest, but the full fixed cost amount plus inflation every year. The second part of the question said to treat NPV of E as zero so it would have made sense regardless of a positive or negative NPV.

I would agree with Daniel. To me, incremental fixed costs is just telling you that they are incurred as part of the new project so should be included in the calculation, as opposed to being existing fixed costs which wouldn't be included (as stated above, past exam papers support this). I also got a negative NPV which is what I expected to get as the question hinted that it would be negative by saying that it was strategically worthwhile and to later assume the value was zero. If the NPV was supposed to be positive, we'd have included it in the final overall NPV value later in the question.

A good question paper, i gave my 100% to prepare, i think i did well this time in F9. And the timing was absolutely perfect, though i am bit slow in writing!!!

Dekerg!!!!!!!!!!!! Please take a look at the structure; It was design to confuse us. Incremental is the additional cost which is as a result of one's actions. The investment require a incremental FC of 750 - assumed one off. This so because the level of production fluctuate - high in the outset and low in the latter years. Base on the question, and my knowledge of incremental cost - vary with the level of productions or its a one off cost base on addition production volume. The question you referred to specifically say per year; therefore we are expected to inflate and account for the full FC instead of the incremental amount. It is tricky, and the examiner intended it to be so. My NPV was almost zero, so I may have lost or gain the required mark(s). The question #1 took me 1hr ten minutes; 25 minutes over-run. I will work the questions when they're posted and comment where I believe we can make an assumption. This forum does not accommodate PDF, so I could be reach at: [email protected] Please, I expect everyone to do it at there own speed at the home and share your opinion - we all MUST appreciate. Regards,

Hi, Anyone remember Q2d, I forgot the exactly question, but in my memories, the question is regarding 3 internal method of hedge the foreign currency trans. risk, could you tell me what is your answer if you remember ?

@gloriakuan i briefed: invoice at home currency netting leading and lagging

Q1. Negative NPV about -46 K Project E, B, D, C, A - 20% Q2. I've done very short as forgote about current ratio 1.4, and have wrong overdraft Q3 WACC 9.3% new project more that 12% Q4. Igoring issue costs, take 9.2 ml fpr right issue Transaction risks: new foreign currency bank acount invoice in domestic currency matching

@Elena why ignore issue costs?

Thank you

WACC 12.5 % TERP 4.5% I messed up my time, i only tempted 5% of my last question. am worried!

Just to let you all know that the exam paper is now available on ACCA website.

Q 1 a. npv shld be negative, and inflated incremental fixed cost should be accounted for in full. concerning the capital rationing situation project e should be included and ranked first because the company already made a decision to invest whether the npv is positive or not so I guess the only capital rationing decision should be about how to invest the remaining 5m on other project with positive npv

https://www.accaglobal.com/gb/en/student/acca-qual-student-journey/qual-resource/acca-qualification/f9/past-exam-papers.html The F9 question paper is now available at ACCA Website

Elina, why did you ignored issue cost? of 200k. I did the same and got 5.4 th ex price.

i got 18.7% as project specific sure it is wrong because i average the beta of fence co and hex before i ungear and regear but sure to pick up some methodical marks..... i hope for a pass

My TERP calculation was: In issue 12m # MV $56.4, $4.70 per share Rights issue had to raise $9.4m (9.2 + 0.2) at $3.76 per share (i.e. 80% of original). Therefore no. shares needed was 9.4m / 3.76 = 2500 shares TERP = Total MV / Total No. Shares = 65.8 / 14.5 = $4.54 per share rounded

I am pleased to hear that someone else worked it out like me. I was getting a bit worried reading some of the comments when mentioned how many shares were being calculating for the rights issue as you didn't need to know if it was 1 for 2, 3 for 4 etc.

Since the F9 question is on-line, I think I am going to rework the exam questions. Re the TERP even if I didnt include the issue cost, I am still getting the $4.54