Forums › ACCA Forums › ACCA FM Financial Management Forums › *** F9 June 2014 Exam was.. Instant Poll and comments ***
- This topic has 222 replies, 86 voices, and was last updated 10 years ago by rutikanga.
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- June 6, 2014 at 6:48 pm #174811
@anuj428:
We were given the revised working capital ratios for 2015 and the revised sales and cost of sales for the same period. We were also given the expected current ratio of 1.4.So I first calculated the expected inventory, receivables and payables, then I used algebra:
1.4 = (inventory + receivables) / (payables + overdraft)
June 6, 2014 at 6:51 pm #174812OD was calculated using the target current ratio of 1.4
June 6, 2014 at 6:51 pm #174813@neelythere…. I got the same TERP as you so I hope it’s correct π
June 6, 2014 at 6:55 pm #174815AnonymousInactive- Topics: 0
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I also got negative NPV 45 so hopefully we will be right.
For the TERP I got 4.5 ignoring the issue cost as well.
June 6, 2014 at 6:59 pm #174816For the 8 mark Q I first calculated the %age increase/decrease in inventory, receivables, payables & overdraft. Compared to a static sales & %age reduction in COS. Then I calculated the %age that WC investment using short term finance had changed & that’s when I finally understood what the Q was asking ie changing to a more risky aggressive approach so I think my first half of the answer may have been rubbish although it was another one of the ones that I couldn’t go back to for being ill grrrr
Completely left out the efficient market hypothesis too (weak, semi strong, strong), knew the answer but left it until last & couldn’t fit it in. Anyone know how many marks that was for?
June 6, 2014 at 6:59 pm #174817AnonymousInactive- Topics: 0
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I got the same answer π
June 6, 2014 at 7:06 pm #174819AnonymousInactive- Topics: 0
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Question 1 – I got a positive NPV of $76,000 (close to that). I am so shocked people are getting negative figure. I can’t sleep cos I felt confident calculating that NPV. The capital rationing, Project E should be ignored. You cannot ratio without NPV, the NPV gives you a clue and if you had use profitability index you are wrong. I got close to $3900 (best option A+B+C then since I believe I failed the NPV, I think adding E to that equation will be better because B and D and mutually exclusive).
Question 2 – Cost of Capital – The ungearing and regearing was sort of fun. I cannot remember my answer though.
Question 4 – Sources of finance and characteristics of long term debt finance (Availability, Level of Finance Risk, Security & Covenant, Cost of Issue) Source of Long term debt finance (Debenture, Bond, Long term borrowings)
Question 3 – Seeing comments here, makes me assume I failed the TERP.
I hope I pass enough. This NPV may haunt me till results are out
June 6, 2014 at 7:08 pm #174821AnonymousInactive- Topics: 0
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6 – 8 marks
June 6, 2014 at 7:09 pm #174822@justkency – you would usually ignore a project with an NPV negative or zero but in this case we were told that the company were going to invest in project E regardless of whether or not it was financially acceptable so we did have to take that into account with the capital rationing.
June 6, 2014 at 7:18 pm #174823@kutiez2005:
The EMH one was for 8 marks:
2 for weak form efficiency
2 for semi-strong for efficiency
2 for strong form efficiency
2 for relevance to finance managersJune 6, 2014 at 7:19 pm #174824Can anyone remember how many marks were available for the systematic & unsystematic risk question with regards to portfolio theory and CAPM?
June 6, 2014 at 7:26 pm #174825Oh dear, 8 marks is a lot to miss out! I feel like I’ve done enough to pass with what I did answer though but I don’t think I will be passing with a very high mark. My lowest so far I think. Need it to be over 54% to keep my average up for the Oxford Brookes BSc so fingers crossed.
June 6, 2014 at 7:29 pm #174826@Abbi:
Question 3 was broken down as follows:
(a) WACC calculation – 7 marks
(b) Project-specific cost of equity – 4 marks
(c) Systematic, unsystematic risk – 6 marks
(d) Efficient market hypothesis – 8 marksJune 6, 2014 at 7:30 pm #174827Ive just realised i mixed up systematic and unsystamatic risk.
I gave the correct definitions just got them mixed up.
Do you think i will lose all marks for that part?
June 6, 2014 at 7:32 pm #174828What s the answer for 1 question …c ….I mean that theory question
June 6, 2014 at 7:34 pm #174829@kutiez2005:
Best of luck! I have P1 left for this session, next Wednesday and here I am procrastinating π …certainly not in the mood to plunge down in an abyss of boredom!June 6, 2014 at 7:35 pm #174830Q1 C we had to write factors for capital rationing like Recession, fear of high interest payments and dont remember what i wrote the 3rd one π
June 6, 2014 at 7:37 pm #174831AnonymousInactive- Topics: 0
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For the adjusted cost of capital in the wacc question what beta did you all calculate?
June 6, 2014 at 7:39 pm #174832@ajmal:
I basically discussed soft capital rationing as follows for Q1(c):
– avoiding dilution of EPS by issuing equity
– avoiding dilution of control by issuing equity
– avoiding higher financial risk by issuing debt
– promoting competition between projects
– covenant restrictions in bond borrowing agreements
– issue costsThis came out recently in the June 2011 sitting Q1(d), quoting from the examiner’s answer:
“Soft capital rationing may be due to reluctance by a company to raise finance. For example, the amount of funds needed may be small in relation to the costs of raising the finance: or the company may wish to avoid dilution of control or earnings per share by issuing new equity; or the company may wish to avoid a commitment to paying fixed interest because it believes future economic conditions may put its profitability under pressure. Alternatively, the company may limit the funds available for capital investment in order to encourage competition between potential investment projects, so that only robust investment projects are accepted. This is the βinternal capital marketβ reason for soft capital rationing.”
June 6, 2014 at 7:43 pm #174833I think I passed. I did all the question. I don’t remember my answers though. but the main thing that puzzle me in the exam was the mutually exclusive projects in #1 but that’s not worth much points, so I think I am good.
June 6, 2014 at 7:45 pm #174836My ppr went kinda good..negative NPV (dun remember the figure) buh it scared the crap outta me the first time, I did the theory parts relatively fine too buh m super worried cxz of my handwriting (it was exceptionally bad today) .. Hoping for a pass in 60s π TERP ratio was kinda tricky too! Buh I did get it somehow..any ways best of luck ya’ all π
Can’t wait for 8th August .. I hate uncertainty lolJune 6, 2014 at 8:02 pm #174838For Q1 do you include a tax saving as a result of the scrap amount? I did this, wonder if thats why my npv was positive.
Q2 I didn’t like that it mentioned figures for the quarter, I ended up dividing my cash operating cycle by 4 but then changed my mind when I saw the figures to compare with the next year.
Wasnt sure about the bit whether it could be positive or negative, I said it would normally be positive unless business has some kind of deferred payment scheme with suppliers like the murabaha thing.
For the question on growth targets I got that they failed to meet them all, used the geometric growth over the 2 years for first two and the last two I took the total shareholder return to mean gain in divs and profit after tax divided by profit + divs from last year.
Lost alot of marks hope my discussion answers carry me through. Goodluck all!
June 6, 2014 at 8:11 pm #174839Any one like to match Q1. a) NPV (292565), B) Rank D, B, C, A,E .
Q2) Working invest. cycle 110 days, overdraft 5——–, acid Test, .59 or 49.
q3) A) Ke- 10.31% IRR-4.42%, WACC- 9.32%, B) Ba- 1.02 and Be- 1.19
Q4) P0- 4.91, g= 3.0—-% After Discount 20% -price 3.76, TERP- 4.52
June 6, 2014 at 8:11 pm #174840@Kevin:
Q1: The only tax savings were on three capital allowances (at T2, 3 and 4) and on the balancing allowance at T5 (which we should have calculated using the scrap value i.e.:
[(Initial investment – accumulated capital allowances) – Scrap value] x TaxQ2: I argued that the cash operating cycle can be both positive and negative since it depends on the the working capital investment policy (if aggressive, could be negative and if conservative, it is positive) and on the business industry (e.g. manufacturing companies have positive, service companies have negative cycles)….not sure about this though.
June 6, 2014 at 8:14 pm #1748428 Marks
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