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

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 ?

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

Thank you

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

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

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

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.

Would you not only include an additional 9.2M in the final market value to divide by the new number of shares as 200k of it would have been spent on issuing rather than adding to the companies value?

I say that now, however I can’t actually remember if I added an additional 9.2 or 9.4 before dividing by the new share total. Hopefully only lose a mark for that bit though if I have done it wrong.

That’s what I did for the total to be raised 9.2+0.2. I was talking about the market value of the company which you divide by 14.5 million shares as the final step. My thinking is that the 200k would not add to the market value of the company.

Has any one Calculated q1(a ) I re calculated it. My answer is coming -49k

I have ran the numbers on Q1 (a) myself a few times and I keep getting 15k positive, in the exam I had £300k negative so I’m not sure, we will wait and see but @tallaghthoop is right the final answer shouldn’t matter a long as the method was followed correctly and logically.

Colleagues!!!!!!!!!!!

I took the time and reworked the exam – F9 paper and I recognized the mistakes I made under pressure. I’ll not say it was an easy paper; but there were quick theory marks that we could grab – if we see them, to polish-out the 50’s for a pass.

Q1(a) The Project is not financially acceptable – base on negative NPV $462,000; BUT the directors says they must undertake this and then we have only $5M remaining to use wisely. The FC is associated with this project and thus inflated each year. There are some assumptions – it state incremental and the volume vary; it could be a one-off or it may be every year. I presumed yearly; not in the exam though!!!!!!

Q1(b) The projects are rank on there NPV/Invest = PI – D, B, C & A. The projects are divisible; but further states – Projects B & D are mutually exclusive. How can a project be divisible and mutually exclusive at the same time? Anyway my Maximum NPV is $3.517m assuming zero for Project E – stated by the examiner. It is D, B & C (900/2600*1350).

Q1(c) One of the main reasons for soft capital rationing – management decisions to limit investment is that they must invest in a project that is not financially viable to remain competitive, efficiency of facility and hard capital rationing – amount they can get at an acceptable rate, inflation rate in the economy (cost out-weight sales). It could be that the funds 10m will just provide 59% return on investment.

I lost some valid marks – but hope to get the required marks for pass – 50 upward.

Q2(a) Working capital cycle – Inventory + receivable – payable. If we notice that Bk OD is huge, thus it form part of the cycle – I presumed, and used it to reduce the cycle to 44 days. This is for the period 2014. Inventory 5700/CoS 26M*365 = 80; Rbles 6575/sales 40m*365 = 60; Pbles 2137/CoS 26m*365 = 30 and with Bk OD, I assumed that they used this as a method of financing – aggressive working capital policy, and apply some creativity 4682/26m*365. If this was not done wcc would have been 110 days (140 – 30). Discussion – I tell what is the working capital cycle and that it should not be negative – relying slowly on short terms borrowings – heavy BK OD and this should not be so as it force the company into liquidation.

Q2(b) 2015 Quick ratio CA – Inventory/CL = .5 times. We’ll have to find the BK OD figure and used the equation 3545 + 8219/3616 + BK OD = 1.4 times. Therefore, 11764*1.4 – 3616 = 12854. Inventory 60/365*24 = 3545m; Rbles 75/365*40m = 8219; 55/365*24m = 3616. Sales to net working capital (4706) negative – tons of short term borrowings. This is 40m/(4.7)m

Q2(c) extract the current asset of the SoFP for both 2014 & 2015 side by side for your perfect comparison and discuss the movements. 2015 pure borrowings – expensive BK OD. Q2(d) Trading in own currency; netting and matching and maintain a foreign currencies account.

Q3(a) WACC is 9.4% equity MV is 75m (10m x 7.5), cost 10.3% 4 +(.9*(11 – 4)); bond market value is 15m @ cost 4.7%. current market value is 107.14, int 5.6 and redemption 100. Q3(b) cost of equity for new project is 12.12%. De-gear Beta Asset 54/54 +(12*.8) x 1.2 = 1.019; Regar beta equity 75 + (15*.8)/75 x 1.019 = 1.16. Use this equity beta; now 4 + 1.16 x 7 = 12.12

Q3(c)d) is discussion – straight forward questions, but I did not get the time to answer it properly to get the maximum marks – hope for 10/14

Q4(a) only one of the objectives seem to be achieve and the others were off. Q4(b) DGM 3.1% 5.1m x 1.031/12 + 3.1 = 34.8m. Discussion efficiency room for improvement. Q4(c) TERP 4.54 12m shares @ 4.7 = 56.4 and 2.5m shares @ 3.76 (20%) discount =9.4m. The issue cost MUST be included because they want 9.2 for the project and the funds raised must cover issue cost. Q4(d) Source of long term finance are the capital market and bond and leasing.

The paper as usual was lengthy and require excellent time management, which is my weak point; but I trust that mercy will be granted this time. I wish all of you success – even if you get 50, give thanks. A pass is what we want noting else!!!!!!!!!!!!