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@dawar555 said:
1. cost of equity 10%
current year no dividend
year1 no dividend
year 2 0.25
year 3 0.50 and it will be increase by 3% subsequently
calculate market value using dividend valuation model…..Ans.
i did this wrong in exam mime answer (7.35)…. but these were forecast values,we would have discounted the value after year 3 to PV of Y 0
calculation : (0.5*1.03)=0.515 then 0.515/0.1-0.03 =7.35 now convert to Pv 7.35*.751=5.5195.519 was not even a option! But even i did 7.35 but i was thinking something was not right cant be that easy now i see its coz you had to discount it! I fked up MCQ badly. I can only hope i can score around 12-13 that will be decent chance of scraping pass. We all going to make mistakes like e.g. WACC i calculated preference using 1-t but then i calculated the normal one d divide p …. i know from kaplan they say if u not sure u shud keep both workings NEVER cross anything as you get marked and not penalised for double mistakes. So im hopeful. But MCQ you get 1 chance. 2 marks or 0
This exams was just something else. Multiple choice questions, the question two of the part B and question 5. Wow what a working capital question. So to even start with i have lost 20 marks
I have a question Sharia. How do u remember every question and how u answered it in explicit detail?
@mc20united20 said:
how come? :O
Every year 3000 cashflows and investment is 9000 no scrap value. the target of roce is 15% and Payback period 2.5 years.all i did for payback period was deducting the investment from yearly cashflow, that means it took 3 yrs.
for ROCE i did was, for avergae investment: (9000-0)/2 and average profit ((3000×5)-9000)/5
ROCE = 1200/4500 = 26.7%.I don’t know what did i miss in that question? :S
Roce was based on initial investment not average investment. so there was no need to divided the 9000/2.. therefore roce would come up as 13.33. below target. so reject.
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@zvix said:
Roce was based on initial investment not average investment. so there was no need to divided the 9000/2.. therefore roce would come up as 13.33. below target. so reject.in exam u should use average values unless stated to calculate ROCE using initial investment value… recommended average values in *exam focus point* in BPP.
i regret to mention this 🙁 only intended to remove doubts ..We needed to compare between cash of $1,000 in 8 years and the ordinary shares in 7 years. How would you compare these two, given that number of years are different?
@zvix said:
Roce was based on initial investment not average investment. so there was no need to divided the 9000/2.. therefore roce would come up as 13.33. below target. so reject.this is what i thought…..So i chose Neither as my option. Hopefully its correct.
@acca145 said:
In mcq it was mentioned that Roce was using initial inv. maybe I am wrong !Yh i chose neither. Surely if they targetted 15% and its 26 is that not exceeding?
How did people do there TAD for NPV?
I did 4000/4 = 1000
Multiply by tax and year 2-5 got 280.
Did people deduct the 500 scrap to do 4000-500 then 28%?
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@acca145 said:
In mcq it was mentioned that Roce was using initial inv. maybe I am wrong !There are three formulas.
1.
Estimated average profit
_________________________ %
Estimated average investment2.
Estimated Total profits
________________________ %
Estimated Initial investment3.
Estimated average profit %
_________________________
Estimated initial investment1st Two formulas shows increased Roce.,last one less..
We are in messed up situation.
@vipulv said:
How did people do there TAD for NPV?I did 4000/4 = 1000
Multiply by tax and year 2-5 got 280.
Did people deduct the 500 scrap to do 4000-500 then 28%?
my TADs were exactly as yours 280. but i did the timing from 1-3 years coz the investment was made in year 1 so had to be accounted for in that year and the TAD for the 4th year i did it like 28%of 500. it was 140 for the 4th year. i dont know if i did it correctly. but for the 280 we definitely on the same page.
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@vipulv said:
How did people do there TAD for NPV?I did 4000/4 = 1000
Multiply by tax and year 2-5 got 280.
Did people deduct the 500 scrap to do 4000-500 then 28%?
U did it exactly as I did….. we will get marks for the effort ?
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For repo q I put 4% I did get 0.99 but as 90 days is only a quarter of the year I times it by 4!! Guess I was caught out.
I put share price increase when announces to media…I thought if only shareholders and analyst know this isn’t public so would be strong form not semi strong hence why I chose fin media.
Dvm q was $7.35
The 80000 ex rat one I got c or d. Initially I got 7k but recalculated as when I re read q they sold at 80000 dollars I initially converted this too when it wasn’t needed. Two lots of 80k in calc was confusing.
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Shariq…there is no comparison required if you can recall the study, when you are calculating the current market value of redeemable bond with conversion rights you need to have below things as usual with NPV calculations…
1)Discounted cash flow(this case 10% i think,)
2) initial cash flow(this case its the unkown figure, current market value of bond.
3) number of years- depending on if the investor prefers conversion value or redemption , value at the maturity.
4) interest cash flow.
5) redemption value or conversion value, depending on which value is more in sense that the investor is rational and will accept the highest value.so in our case, the first question the redemption value should be taken because comparing it with conversion value, it gives you the highest.- you should also respect 8 years
for the second question, take the conversion value and discount it for 7 years, because the investor is rational and he opted for the conversion rather then redemption.
@zvix said:
my TADs were exactly as yours 280. but i did the timing from 1-3 years coz the investment was made in year 1 so had to be accounted for in that year and the TAD for the 4th year i did it like 28%of 500. it was 140 for the 4th year. i dont know if i did it correctly. but for the 280 we definitely on the same page.I think your n my answer is correct if scrap is not included. However…. tax was 1 year in arrears hence year 2 to 5.
@dawar555 said:
U did it exactly as I did….. we will get marks for the effort ?I would think so. As we knew we had to tax by 28% too. I would be suprised if i do not get mark for that.
Anyone remember the format of section B. ?
for mcqs of roce and payback
everyone of us has calculated the payback right i.e 3 which was greater than 2.5…..rejected
For roce it was a calculation based up on initial investment
So according to formula it should be 3000/9000 i.e 33 percent or by another way 15000/9000 its even greater i.e 166 percent…
and if it was asked for average investment then again its acceptable 3000/4500(9000/2) which is 66percent
by all formulas its acceptable and greater than 15percent……In Q5, I think the question had something in there just after it mentioned the WIP is 50% complete that finished goods is related to costs incurred or something? Does any one remember this and what that meant exactly or was that just something designed to throw you off?
Thanks 🙂
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zero coupon bonds mcq, i said $100 anyone else?
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