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@emo777 said:
But they asked for the effect of rights issue? What you wrote was general. I talked about 3 possibilities: when shareholders take the rights, when they sell the rights and when they do nothingI said I didn’t do great with this question, but just had a stab at what I thought might get some marks.
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Q4 :/
So, to conclude with the hardest mcqs:
1) all three choices were financial intermediaries
2) factoring improves efficiency of trade receivables management in a company
3 market segmentation explains kinks in yield curves
4) money deposits are short term loans between banks, and this option was wrong
5) beta of debt understates financial risk, this was also wrong
6) borrowers buy futures and sell them later, this option was wrong
7) share options always reward good performance, this option was also wring
8) expected net present values are used for projects with several outcomes ONCE, this was incorrect as we know that expected values fo occur during many times, not just once@emo777 said:
I think you messed up with 5% premium 😀 i think it was given to mislead us. The thing you had to do is to multiply net cash raised after issue costs by 100 and then divide by 104 to find the nominal value of loan to be redeemed. The you calculate the saving on interest. They took it from bpp revision kit, and you need premium only for calculation of cost of redeemable debt, which was not relevant in this case.The premium was relevant. The holders of the bonds said they would allow them to be bought back at market value plus a premium of 5%. You can’t force the bond holders to sell so you have to pay what they ask!
@mfc2476 said:
That’s a bit reassuring Jenny. I also calculated that we could buy back 100,000 bonds @ 109.20?For the second part of the question I spoke about traditional theory and M&M. I mentioned about the tax shield effect when paying interest as opposed to dividends which are not tax deductable. I concluded that paying off the debt will probably not acheive the aim of optimising the WACC as the debt is cheaper?
Exactly as I did. Equity costs more than debt so increasing equity and decreasing debt will not optimise structure according to any of the theories.
@emo777 said:
But they asked for the effect of rights issue? What you wrote was general. I talked about 3 possibilities: when shareholders take the rights, when they sell the rights and when they do nothingMFC2476 was talking about part b rather than part a which asked about whether buying back the bonds would optimise capital structure – for that part I think his answer is spot on.
@emo777 said:
So, to conclude with the hardest mcqs:1) all three choices were financial intermediaries
2) factoring improves efficiency of trade receivables management in a company
3 market segmentation explains kinks in yield curves
4) money deposits are short term loans between banks, and this option was wrong
5) beta of debt understates financial risk, this was also wrong
6) borrowers buy futures and sell them later, this option was wrong
7) share options always reward good performance, this option was also wring
8) expected net present values are used for projects with several outcomes ONCE, this was incorrect as we know that expected values fo occur during many times, not just onceThe problem with these horrible ones is that there were so many that were four options so the combinations meant they were hard to guess. Even if we settle on one option being right or wrong we still don’t know the overall answer if we can’t remember the rest of the options – this is why I still haven’t a clue how I did with these!
Do u guys know when the answers will be uploaded by opentuition team. Last sitting they updated the F5 one the very next day??
@emo777 said:
So, to conclude with the hardest mcqs:1) all three choices were financial intermediaries
2) factoring improves efficiency of trade receivables management in a company
3 market segmentation explains kinks in yield curves
4) money deposits are short term loans between banks, and this option was wrong
5) beta of debt understates financial risk, this was also wrong
6) borrowers buy futures and sell them later, this option was wrong
7) share options always reward good performance, this option was also wring
8) expected net present values are used for projects with several outcomes ONCE, this was incorrect as we know that expected values fo occur during many times, not just onceQuestion 2 above – I believe I chose the option that said this was untrue. Factoring is the process of outsourcing the credit control department – not sure it will always result in the improving of efficiency, subject to the factoring arrangement = with/without recourse?
These were the trickiest ones. It you got them right, your answer was probably right as well)) btw, investors require real returns regarding interest rates
@mamaleek said:
Question 2 above – I believe I chose the option that said this was untrue. Factoring is the process of outsourcing the credit control department – not sure it will always result in the improving of efficiency, subject to the factoring arrangement = with/without recourse?Because the company benefits from the expertise of the factor – it’s their job to collect debts – so receivables may be collected faster, bad debts reduced, hence more efficient for company.
@emo777 said:
Jenny, what would you say?About what?
@jenny3549 said:
Exactly as I did. Equity costs more than debt so increasing equity and decreasing debt will not optimise structure according to any of the theories.I started to go on about that, MM how debt is cheaper than equity as long as you don’t have too much.
Could you not argue they had too much debt either, so selling the debt off is not necessarily a bad thing from the other viewpoint?@usamaniaz said:
Do u guys know when the answers will be uploaded by opentuition team. Last sitting they updated the F5 one the very next day??I suppose it depends on whether they work weekends – ACCA I mean. If they don’t then the questions won’t be published til next week and OT can’t do suggested answers til they see the questions.
Fingers crossed for ACCA working tomorrow!
1) all three choices were financial intermediaries
2) factoring improves efficiency of trade receivables management in a company
3 market segmentation explains kinks in yield curves
4) money deposits are short term loans between banks, and this option was wrong
5) beta of debt understates financial risk, this was also wrong
6) borrowers buy futures and sell them later, this option was wrong
7) share options always reward good performance, this option was also wring
8) expected net present values are used for projects with several outcomes ONCE, this was incorrect as we know that expected values fo occur during many times, not just once@emo777 said:
You already replied to Mohammed. ThanksNo worries – we cross in the ether!
@jamesuk19 said:
I started to go on about that, MM how debt is cheaper than equity as long as you don’t have too much.
Could you not argue they had too much debt either, so selling the debt off is not necessarily a bad thing from the other viewpoint?You could – financial risk reduced could lead to fall in required return from equity investors etc. I think that often, with the discursive parts, the marking scheme says things like ‘one mark per relevant point’ so if the marker thinks it’s relevant you get marks.
@gtavicecity said:
It is surprising to see you guys are just discussing Part B, though part A is the deciding factor in your success. Lets share answers to mcqs.We are trying but they are hard to remember all the options for each answer so hard to say what was the right one. B is easier both because you can remember the questions because you spent longer on them and they weren’t the nightmare A was!
@nitrous83 said:
29 for priceQuestion 5 NPV – what was your calculation to arrive at this figure?
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