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So, Jenny, apparently the one regarding borrowers was a wrong statement. You are right on roe and 6% growth. I think in the question which had beta of debt, you messed the first statment. The first statement in that mcq claimed that asset beta has only business risk and this option was right. However, you are right that the one with beta of debt was wrong. You are right on real returns as well, this option was correct
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Hi Guys
Anyone notices how well opentuition guessed the topics for exam.
Section B – 5 questions:
– Management of receivables
– Valuation of business (using PE ratio, and using dividend valuation model)
– Investment appraisal – NPV calculation (plus capital rationing)
– WACC calculation (including CAPM)
– Gearing (financial and operational)
Theeasury bills are sold at discount, factoring improves efficiency, recourse factoring improves bad debts
@emo777 said:
So, Jenny, apparently the one regarding borrowers was a wrong statement. You are right on roe and 6% growth. I think in the question which had beta of debt, you messed the first statment. The first statement in that mcq claimed that asset beta has only business risk and this option was right. However, you are right that the one with beta of debt was wrong. You are right on real returns as well, this option was correctLike I said, I can’t remember the options – though that’s not too bad – if the question said asset beta is only business risk I would have said yes so either way, would know the answer to that statement.
Jenny, try to remember the option with money market deposit definition 😀 also, do you remember the option where they described calculation of expected values for projects with several outcomes ONCE?
@emo777 said:
Jenny, try to remember the option with money market deposit definition 😀 also, do you remember the option where they described calculation of expected values for projects with several outcomes ONCE?They are two I just cannot remember at all. I vaguely remember staring at the option about the EVs thinking ‘hmmm’ – again, worded in a way to deliberately confuse rather than test understanding – no idea what the other options were.
The money market deposit question – again, remember being unsure of that one but not of the other options so whether right or wrong depended on that one alone and again, wasn’t sure – I think I went with with that being true as banks lend to each other through money markets but I can’t actually remember for definite which is annoying!
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My one line answer to Exam for me is
RE SIT AGAIN ……….
@emo777 said:
So you marked the one with evs as wrong?I honestly can’t remember!!!
I really think those MCQs were far, far harder than expected. I really think, that with some of them it wouldn’t have made a difference if I’d had a text book in front of me in the exam!!!
Question 1 was weird. Got 310 k doing normal hedge and 301 I think doing a forward market hedge. HOWEVER it said they don’t have sufficient cash to borrow or something so I just recommended a normal forward rate after that. Even if that bit is wrong should hopefully get 4/5 for the workings.
Cheers Jenny.
I think the IRR MCQ one I figured out in my workings to be 18% so I went with the option 17.8%, but I know there was also a 17.2% option so not sure :s
I agree with most of the other numerical MCQs, I got 48k with Baumol, but that’s because I used 5% instead of the net 4% so I presume the 57k answer is right.
Q20 was 2.10, the WACC was 8.8%, the exchange q (no gain or loss) was 1.418, 6% percentage growth correction option on one of the first numerical MCQs (option D). 96.94 for the value of the loan note, ROE was the incorrect option on one of the questions (used PBIT instead of Profit after tax and preference share dividends).NPV in Q5 I got 3,807. Q3, net cost of using factor or around 200-300k but I think I did this wrong. Q2 I was calculating the total values in a and b rather than per share, do you think I will be penalised?
Good luck to all of you! Praying for that 50% mark!
@irondan11 said:
Question 1 was weird. Got 310 k doing normal hedge and 301 I think doing a forward market hedge. HOWEVER it said they don’t have sufficient cash to borrow or something so I just recommended a normal forward rate after that. Even if that bit is wrong should hopefully get 4/5 for the workings.Saying they don’t have the cash right now was the hint that they would need to borrow – hence to include in the hedge calculation – but like you said, only one mark max for the recommendation.
Guys, in question 2 as i remember they asked per share, right? However, it is the same if you get per share or total values :)) but think they adked per share
@jparker7 said:
Cheers Jenny.I think the IRR MCQ one I figured out in my workings to be 18% so I went with the option 17.8%, but I know there was also a 17.2% option so not sure :s
I agree with most of the other numerical MCQs, I got 48k with Baumol, but that’s because I used 5% instead of the net 4% so I presume the 57k answer is right.
Q20 was 2.10, the WACC was 8.8%, the exchange q (no gain or loss) was 1.418, 6% percentage growth correction option on one of the first numerical MCQs (option D). 96.94 for the value of the loan note, ROE was the incorrect option on one of the questions (used PBIT instead of Profit after tax and preference share dividends).NPV in Q5 I got 3,807. Q3, net cost of using factor or around 200-300k but I think I did this wrong. Q2 I was calculating the total values in a and b rather than per share, do you think I will be penalised?
Good luck to all of you! Praying for that 50% mark!
I also did total values – not per share – bugger, must have misread the question. I hate the exam pressure – makes you miss things you would normally see!
@emo777 said:
Guys, in question 2 as i remember they asked per share, right? However, it is the same if you get per share or total values :)) but think they adked per shareUnfortunately not the same. Examiner has said before (when asked for total) – candidates did not multiply by no. of shares so lost a mark – so I assume same applies in reverse.
Thought I did okay on 2a/b but now not so sure – know c wasn’t great as couldn’t really remember advantages – certainly not enough for 5 marks.
Yeah, actually i calculated values, then, it seems that i have read they ask per share, thats why divided by number of shares in the end
Q2 For Dividend growth model I got $11,10 or smthing like that price per share.. By applying a growth rate of 8.5%.. Is it right?
I got 9.71. And growth rate was 3.85% or smth like this, dont remember exactly
On MCQ 1, statements 1 and 3 were definitely wrong as they were mixing up monetary and fiscal policy. Statement 2 was the only correct one.
Has anyone else got P3 on Monday?
Question 4 was difficult and one of the very few areas I didn’t practise in massive detail, in part b I got carried away and started doing some random WACC calculations for both before and after the rights issue, spending ages only to realise it said “Discuss”.
So I started speaking about how WACC has increased because there is a greater proportion of equity making up the capital structure, but also that redeeming some of the debt has decreased financial risk.
Finally I spoke about traditional view, M&M and M&M with tax.
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