*** F9 September 2015 Exam was.. Instant Poll and comments ***

Ahhh you could be right but in heat of the moment i thought factoring would bring in more sales hence retained profit which would raise finance in the pecking order theory but I could be totally wrong

What did people get for the mcq relating the the risks? Translation, economic, trasaction? or one was trasaction and economic. I was thinking it was A – transaction risk only.

What about the percentage on cum div question? I got 11.8%

Transaction and economic risk as the question said the company will be trading with the foreign company for the next few years. Am I right?

Hi Guys! All 20 MCQs which appeared today are as follows but, please note they are in random order.

1) Transaction risk, translation risk and economic risk (all three were correct for the particular three line scenario MCQ)

2) NPV MCQ (The scenario was about three lines long with inflation given, after taking inflation into account, the correct answer was D)

3) Current MV of loan notes (three to four lines long scenario again, this was MCQ number 18)

4) MCQ on SME that how SMEs can raise finance (I did business angels, factoring of receivables and money markets)

5) There was a MCQ scenario for about four lines on WCM policy. Statement 1 represented profitability; and Statement 2 represented liquidity

6) ROCE & ROE MCQ – This was also a scenario about a company (Neither targets were achieved by a company)

7) I think with very last MCQ I did 1875

8) There was a NFP scenario MCQ , where the girl Hanna was evaluating the performance of NFP (i did D)

9) What is the main objective of FM? (i did D, Maximisation of S/H wealth)

10) Managerial reward scheme MCQ – i did A

11) DGM MCQ – (with growth rate to calculate and also using formula) – (i did 11%)

12) EMH MCQ- Market paradox, Behavioural finance etc etc (i did A)

13) Commercial paper MCQ- this MCQ was three line long where we have to calculate annualised percentage return the company would earn if they invest money) I think this was dodgy

14) Financial intermediaries MCQ – (I did Maturity transformation, Aggregation of funds, etc )

15) Capital Markets MCQ- (this MCQ required to choose from Eurobonds, treasury bills, commercial paper, loan notes, equity shares etc etc)

16) Money market hedge (MMH) MCQ- three to four lines scenario, required to evaluate a dollar receipt (i did A)

17) There was an MCQ on interest rate derivatives, in particular, interest rate options

18) Purpose of Business valuations MCQ – (three or four were correct)

19) Annual cost of discount MCQ – This was three to four lines scenario testing the WCM (receivables area)

20) Fiscal policy MCQ – how Gov. decrease inflation?

NB: These MCQs are not in order as appeared in exam. I don’t know how do I seem to remember all these MCQs. Hopefully, these would provide a little help to my fellow F9 candidates on opentuition 🙂
Thank you.

I managed to do 12 of the mcq in reading time, still ran out of time on question 5. Think mcq were ok, Q1 and 2 were good then things went down hill……

I said lease rather than buy.

Wrote loads on gearing, dividend cover etc. Hopefully some marks there.

I said bank offering 3.5% to 4.5% was good as it eliminated some risk.

I guesstimated what marks i should get, came out as 55%, will be happy if thats right.

F6 up next in December. Start studying for it tomorrow and try and forget f9 exam.

I said number attending for school mcq, cost is efficiency not effectiveness was my thinking.

one of the mcq i kept getting 4.99% closest option was 5.1% so went with that, think it was mcq20

Yes I was also getting 4.99% and spend a lot of time on that question because I kept thinking maybe i am missing something.
ROCE and ROE neither targets were met.
Think I got the translation, transaction risk wrong, because I chose all 3, but going by Bryan’s explanation there wasn’t any translation risk.

I hardly had any answers as C. Out of 20 MCQ’s maybe 2 or 3 were answer C.

Horrid exam I thought.

The investment question (Q4 I think), I re-drafted the financial statements based upon the info the did some ratios to pit against the market averages and worked out some shareholder wealth ratios to satisfy that requirement. Did anyone else re-draft F/S or have I gone off piste here as seemed to take too much time for marks available?

lease n buy and forex was disaster

I redrafted the financial statements for question 4 I think. You had to as it needed to compared interest cover.

Paper was a disaster third time and I know I will be unlucky. I did answer everything so hopefully I might scrap a pass

I used the net asset model the dividend model and for the income based approach I want sure and did profit after tax divided by the efficiency yeild I think it was? :/

I thought this exam was proper time pressured.

Q1) This was a managing stock question which required to analyse the impact a proposed discount would have on the cost of ordering (CO), Cost of Holding (CH) and purchase price. I do not think it required to use the actual formula which had the square root involved, rather just calculate: CH = CH x Q/2 and CO = CO x D/Q and purchase price. The end result was that the discount was more prefered as you get a reduction in cost. This question was very similar to a pass exam question. I did not get part b when they asked about the tresury department? did anyone understand that? I just wrote about why it is important to hold cash?

Q2) This was a business valuation question. The way they worded the question was tricky, but I think they were asking for the Net asset valuation model after taking into account the reduction in recieveables etc so it was the liqidation basis. Then The earning yield method, as they gave this percetage in the question. Which is earning/earning yield. the last model was the DGM model. Part B required to say the disadvantages of using a cash basis model? was this just evaluating Dividend growth model?

Q3) was a complete write off. I did not understand any of it. I thought they were going ask a money market hedge question and compare it to a forward but did not expect a full on theory question. I just wrote that the ways to reduce risk were things such as matching concept, lagging and leading etc not sure if that was right?

Q4) Evaluating the use of debt finance. I calcuate stuff like the interest cover once taking into the account of the 8% interest of the 20M raised and made a revised income statement based on the increase in sales and stuff. Then calcuated new gearing, and EPS? thats all, am not sure if there was anything else? EPS Rose so it was an increase in shareholder wealth? there was no info on the share price so it could not be calcuated? or could it? there was no P.E either.

Q5) what a complete write off. They did not give any cost of capital!! I am assuming this question wanted us to do an NPV calcuation based on the five years. There was no corporate tax caculation as there was no operational flow (Sales less Fixed cost & V.C given) therefore, it was just the tax relief obtained from leasing and the lost scrap and lost W.D.A that was obtained from year 2 to 6 even though it was a five year life cycle, the tax was paid in arrears as stated in the question. The overall affect was lease was better. The discount factor to use was 10% subtract the tax of 25% which makes it 8%? But it was debateable if you was suppose to use the fisher equation as there was inflation involved? I am not fully sure about this because it would of been (1+8%) x (1+4.5%) = (1 +i) i being the nominal cost of capital. But in the equation the inflation part needs to be a general rate, but in the question it was specific to the buy option. so I do not know!!

Multiple choice question: It was defo the cost per student that was not efficient, this is because cost is relating to economy (i.e cheapest price objective)

R.O.C.E and the other one – it was neither.

Q1 – it was just transaction and economic risk because it was dealt in a foreign currency. Translation was not the answer because that would mean it would have an effect on the balance sheet, but the questions stated that this was netted of to nil at the end of the year. so it was no effect.

Really struggled on the question which asked to evaluate the % obtainable from the note to maturity? any one else choose 5.1%? the options were either 1%, 5.1% or 7.99% or 7.5% or something?

The multiple choice questions were to hard and worth to much of the paper. one slip up and it basically costs you. hate them!!

Hope that helped!!

@hassan1123 said:
I thought this exam was proper time pressured.

Q1) This was a managing stock question which required to analyse the impact a proposed discount would have on the cost of ordering (CO), Cost of Holding (CH) and purchase price. I do not think it required to use the actual formula which had the square root involved, rather just calculate: CH = CH x Q/2 and CO = CO x D/Q and purchase price. The end result was that the discount was more prefered as you get a reduction in cost. This question was very similar to a pass exam question. I did not get part b when they asked about the tresury department? did anyone understand that? I just wrote about why it is important to hold cash?

Q2) This was a business valuation question. The way they worded the question was tricky, but I think they were asking for the Net asset valuation model after taking into account the reduction in recieveables etc so it was the liqidation basis. Then The earning yield method, as they gave this percetage in the question. Which is earning/earning yield. the last model was the DGM model. Part B required to say the disadvantages of using a cash basis model? was this just evaluating Dividend growth model?

Q3) was a complete write off. I did not understand any of it. I thought they were going ask a money market hedge question and compare it to a forward but did not expect a full on theory question. I just wrote that the ways to reduce risk were things such as matching concept, lagging and leading etc not sure if that was right?

Q4) Evaluating the use of debt finance. I calcuate stuff like the interest cover once taking into the account of the 8% interest of the 20M raised and made a revised income statement based on the increase in sales and stuff. Then calcuated new gearing, and EPS? thats all, am not sure if there was anything else? EPS Rose so it was an increase in shareholder wealth? there was no info on the share price so it could not be calcuated? or could it? there was no P.E either.

Q5) what a complete write off. They did not give any cost of capital!! I am assuming this question wanted us to do an NPV calcuation based on the five years. There was no corporate tax caculation as there was no operational flow (Sales less Fixed cost & V.C given) therefore, it was just the tax relief obtained from leasing and the lost scrap and lost W.D.A that was obtained from year 2 to 6 even though it was a five year life cycle, the tax was paid in arrears as stated in the question. The overall affect was lease was better. The discount factor to use was 10% subtract the tax of 25% which makes it 8%? But it was debateable if you was suppose to use the fisher equation as there was inflation involved? I am not fully sure about this because it would of been (1+8%) x (1+4.5%) = (1 +i) i being the nominal cost of capital. But in the equation the inflation part needs to be a general rate, but in the question it was specific to the buy option. so I do not know!!

Multiple choice question: It was defo the cost per student that was not efficient, this is because cost is relating to economy (i.e cheapest price objective)

R.O.C.E and the other one – it was neither.

Q1 – it was just transaction and economic risk because it was dealt in a foreign currency. Translation was not the answer because that would mean it would have an effect on the balance sheet, but the questions stated that this was netted of to nil at the end of the year. so it was no effect.

Really struggled on the question which asked to evaluate the % obtainable from the note to maturity? any one else choose 5.1%? the options were either 1%, 5.1% or 7.99% or 7.5% or something?

The multiple choice questions were to hard and worth to much of the paper. one slip up and it basically costs you. hate them!!

Hope that helped!!

Hi,

Thanks for sharing your information and refreshing my memory, let me share my information as well.

Q1. EOQ: Discount is preferred. Centralized treasury department is covered by BPP. Benefits include: centralized liquidity management, cheaper bulk borrowing, better investment opportunities, smaller pool of contingent fund, able to hire treasury expert, better foreign exchange risk management.

Q2. Agree with your part A. Part B, disadvantages of DGM include constant dividend growth rate, constant cost of equity, cannot be used for companies not paying dividends.

Q3. Part A: The FRA offered by bank is 4.5%. If interest in 3 months time is higher, bank pays the company, if lower, company pays bank
Part B: Interest payment in 9 months time is subject to foreign exchange risk. If euro strengthens against dollar, the company lose out. If euro weakens, the company gains (it is likely that euro will strengthen as the forward rate is quoted at premium). This can be managed by forward contract, or money market hedge (then I briefly explained the forward rate that can be fixed now, or use spot rate, convert into euro and deposit for 9 months).
Part C: Explain interest rate parity, purchasing power parity, and expectation theory.

Q4: Redo balance sheet and income statement after the expansion, then calculate financial and operational gearing, interest cover, ROE, and EPS and compared with industry average. I concluded that the expansion by loan note is financially acceptable as it can increase shareholder wealth without increasing financial risk too much.

Q5: I used 8% as discount rate, but I think the correct rate to use is 6% (8% X 0.75). Time was not enough so I overlooked it.

Hope we can do well!