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- June 10, 2010 at 2:24 pm #63207
can anyone tell me what the discussion questions about?
June 10, 2010 at 2:26 pm #63208Question 1 – I got 20% that there would be a negative balance. I think I screwed up the second part even though I drew a probability tree with the -500 OD starting balance. I think I will get method marks for this.
Question 2 – Easy valuation of redeemable shares. WACC straightforward when introduced debt brings the cost down. The main part was the issue of the bond and discussion. Not a good idea. The company operates in a software industry and therefore is a technology company (think growth – debt bad, equity expensive). I explored preference shares but said that was window dressing a fixed dividend charge which is more or less a fixed interest charge. I recommended more equity to cover the overdraft.
Question 3 – The idiot trainee double counted interest, had depreciation, discounted at the cost of debt (should have used WACC), did not calculate contribution correctly and included the sunk cost of $200k on development. When I re-performed the calculation I used WACC to discount. I took into account the remaining fixed cost and inflated it although im not sure thats entirely right as I wasnt sure if it was incremental fixed costs or if just the interest portion was. What do you think. My reccomendation was NPV > 0, so buy.
Q4 – I approached it using a DVM for current period and got a share price of approx $7 (using equivalent annual growth I got growth about 4%). For the second part, What i did was i did a DVM assuming 3% growth rate and .70 dividend with the same Ke. what I got was a share price of about $10. Then to analyse I took the equivalent annual growth of the dividend from .40 to .70 and noted that it was 15% which was untraditional given the 4% prior growth rate and the 3% after. In short the Director was full of it.June 10, 2010 at 2:27 pm #63209AnonymousInactive- Topics: 0
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i think i will take that paper once more
June 10, 2010 at 2:32 pm #63211Was the first questn a simulation model questn or the Expected value questn? I thnk we had to calculate cashflows using simulation model,,I didnt kno how to calculate using simulation model as i tho8 no numericals wud be asked from it,,there is a similar q in kaplan text for simulation model though but never bothered to study it thnking numericals will not be asked…Paper was a disaster,,completely a different style,,v unexpected…
June 10, 2010 at 2:34 pm #63212AnonymousInactive- Topics: 0
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This paper was really not bad. Thanks no parity 😉 Q1 was a big present but suited to F5 more than to F9! Q2 was also very nice and straighforward, it had big pleasure to do it. Q3 and Q4 werent very difficult. Actually Im very happy for F8 and F9! Both of them were fair!
June 10, 2010 at 2:38 pm #63214AnonymousInactive- Topics: 0
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I think when i finish ACCA i will go to Head Office and tell them that part of the furniture and good offices came from me because i cannot be repeating the same subject for 3 consecutive sittings. The paper was rough for i must say and wishing december will bring smiles to everyone.
June 10, 2010 at 2:42 pm #63215AnonymousInactive- Topics: 7
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hi
I think questions 1 and 4 were unfair. Total shareholder’s return was not coverd in Kaplan Kit (In textbook yes,) also counting probability… (is counting probability part of the syllabus?)
One hope is that if someone was good at discussion part, could be scoring well in this exam..
M
June 10, 2010 at 2:42 pm #63216As an exam it was ok, having said that, my hand still hurts from all the writing!. As an F9 exam, I’m not so sure it worked. From the very beginning i found it a bit odd, almost disjointed from the syllabus. Does anyone think that maybe it should be split into five questions so at least it can cover some of the core areas of the syllabus in a more complete manner?
Thanks trainee accountant for the extra work on the NPV question, lol!
June 10, 2010 at 2:44 pm #63217AnonymousInactive- Topics: 0
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I had to do Q3 twice because I messed up the first time lol
I got an NPV > 2000
Thought it made sense after adding back all of the nonsense that the trainee put in but I was still a bit iffy on having a return over 100% invested.Anyone else get anything stupidly high?June 10, 2010 at 2:46 pm #63218AnonymousInactive- Topics: 0
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@samandrews said:
what did everyone do for the dividend valuation model where there was going to be no dividend paid for 3 years?I calculated the share price with 70 c. and growth of 3%. I received something about $ 10. Then I discounted this number for 3 years with 10% and I received 7 point something. I don’t know if this is the wight way?
June 10, 2010 at 2:48 pm #63219Yeah i got NPV of approx 2500. Stupidly high made me second guess myself but sure whatever Mr. Head.
June 10, 2010 at 2:53 pm #63220arggghhhh good god that was the worst f9 paper i have ever sat and after sitting 3 you think i should be a pro! 🙁
for the DVM the first part i calculated the growth before which is current div / old div to the power of 1/no of movements which gave a 4% growth and $7. something then the second used the 70cents and then 3% growth and it gave me $10 something.
Can anyone remember what the last part of question 2 and 3 was?
Ta
Thw Wacc i got 11
June 10, 2010 at 2:54 pm #63221AnonymousInactive- Topics: 0
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I tried dividend growth over 6/5/4/3 yrs but no matter what I did I got g>coc so formula didn’t work as denominator -ve.
I just couldn’t see any logic in using the 3% at the time as it said assume 3% after 2013.June 10, 2010 at 3:04 pm #63222Q1 – I got the closing account balances for period 1 and 2 that was pretty straightforward i think..but then the other two questions about calculating the probability of a negative account balance and calculate the probability that the account balance will exceed the overdraft limit or something (i dont remember it properly) those confused me so i skipped them..then there was a that part about trade receivables management policy. In that question I just waffled on about how they should assess the credit worthiness of customers and the usual debt collection procedures they should adopt…the last part of the question was about the importance of liquidity and profitability in working capital management and i wrote that a company need to strike a balance between the two…I was surprised at the 13 marks for the EV calculation..Didnt feel like it was worth 13 marks lol..
Q2 – Um..this question didn’t seem two difficult but it was a bit confusing. I calculated the after-tax cost of debt. Then we were so supposed to explain the effect the bonds issue had on the WACC..i wasn’t sure if the WACC should be calculated using the book value of the overdraft (4.5m) or were we supposed to use the new limit on overdraft 500,000? Anyone have any ideas? Or how did you people solve it? So yeah that part confused me a bit. The other part was interest cover and gearing if I remember correctly..I calculated the interest cover before the bond issue and after the bond issue and then compared them both the the sector avg. Same thing for gearing…Hmm I think that was it right? I dont remember the rest of the question…
Q3 – The trainee was quite retarded obviously 😛 included depreciation, didnt adjust for inflation rates..part of the fixed costs were already committed (therefore irrelevant)..used a DF of 10% instead of the WACC..The one thing I wasnt sure of was was the mentioned the REAL rate of WACC and then they also mentioned the rate of general inflation..I calculated the nominal rate of WACC using the formula (1+1)=(1+h) x (1+r)..but I’m not sure if i was supposed to or if we were just supposed to use the given WACC..anyway after using that formula I got a rate of appx. 12% so I used that..but my NPV was was too high to be true lol..I think i mightve messed up the calculationgs somewhere. Overall though the answer seems to be that the NPV is actually positive and the project should be accepted…The other part of the question about how to overcome certain difficulties in project appraisal (different asset life cycles, several IRRs, business risk), I kinda just guessed..wrote whatever came to my mind..again alot of points for that part, unfortunately 🙁
Q4 – While doing past papers I never felt the need for more time..3 hrs was basically enough to finish all the questions and review my answers but during the exam I found myself under a bit of time pressure when I got to Q4..I didnt really answer it as well as i probably couldve if I had more time..Used the formula for TSR and dividend yield is pretty easy to calculate..i forgot to caluculate capital gain though..oh well…and the rest of the question I answered what I could in the 15-20min I had left so yeah..I think Q4 was kind of a lost cause…..
Anyway..overall I was disappointed with the paper..It was so totally different from the usual question types..I bet even if we could solve all the past papers without any problem – like totally mastered them – we still wouldnt have been prepared to answer the questions on this exam..it was just so different. I just hope I get a 50. I dont think anyone is looking forward to taking this paper again..good luck to you all 🙂June 10, 2010 at 3:05 pm #63223AnonymousInactive- Topics: 0
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In the last part where we had to calculate share price on DVM.. I think that dvm assumes that dividends will be paid in perpetuity…. so, i dont get that 3 years without dividend part and how to calculate share price on dvm.. i dont know what i did but i got $5.8sp.
i got probability of 20% on q1 a{iii}.. and 18% on a{iv}Would anyone please tell me whether the interest payments and tax savings on interest should have been included in the NPV calculation!!!
June 10, 2010 at 3:06 pm #63224@fundamental said:
I had to do Q3 twice because I messed up the first time lol
I got an NPV > 2000Thought it made sense after adding back all of the nonsense that the trainee put in but I was still a bit iffy on having a return over 100% invested.Anyone else get anything stupidly high?
ya I got something ridiculously high too..I was like what the…but i didnt have enough time to go and check through so i just assumed it was all right….glad to see im not the only one..
June 10, 2010 at 3:11 pm #63225@decentguy185 said:
In the last part where we had to calculate share price on DVM.. I think that dvm assumes that dividends will be paid in perpetuity…. so, i dont get that 3 years without dividend part and how to calculate share price on dvm.. i dont know what i did but i got $5.8sp.
i got probability of 20% on q1 a{iii}.. and 18% on a{iv}Would anyone please tell me whether the interest payments and tax savings on interest should have been included in the NPV calculation!!!
how did you calculate those probabilities? I was totally clueless about those..
I didnt include the interest payments because i think in NPV we assume that Interest is included when the WACC is used (coz the WACC already takes into considereation the interset on debt??)…Not sure if thats right though..June 10, 2010 at 3:13 pm #63226AnonymousInactive- Topics: 0
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@decentguy185 said:
i got probability of 20% on q1 a{iii}.. and 18% on a{iv}I got the same percentages 🙂
June 10, 2010 at 3:13 pm #63227AnonymousInactive- Topics: 0
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I think the paper was just a mere effort to reverse last sessions paper, completely opposite from december one… but i think they tried to make it tricky but easy if properly understood. Look at the probability part of first question, in que 4 look at finding out capital gain, no dividend for 3 years… points that we will never ever see in exam kit… but i had a much better paper than last time….. should be able to pass… but i think the view that paper was not a fair picture of overall syllabus… i think they should put one more question to make it 5 questions… but i guess they generally have their targets on how many students they need to pass…
June 10, 2010 at 3:14 pm #63228@louibee said:
arggghhhh good god that was the worst f9 paper i have ever sat and after sitting 3 you think i should be a pro! 🙁for the DVM the first part i calculated the growth before which is current div / old div to the power of 1/no of movements which gave a 4% growth and $7. something then the second used the 70cents and then 3% growth and it gave me $10 something.
Can anyone remember what the last part of question 2 and 3 was?
Ta
Thw Wacc i got 11
I got around $10.40 if i remember correctly..using the historical data and around $10.60 using the DVM..but I thought $10 seemed like a bit much..still confused :S
June 10, 2010 at 3:17 pm #63229AnonymousInactive- Topics: 0
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Like some others this was my third attempt at this paper.
I liked question 1 , which Was essentially asking for a weighted average.while this was not in the study texts it was in the bpp ipass cd so I am grateful for having that.
I’m also glad to see some of the numbers here making sense to me, I’m not optimistic of a pass but like someone else said- forget about it , it’s summer!
There really does seem to be a pattern of examiner shifting from ‘normal’ questions to more unsual formats – in this paper the ‘correct a trainees mistakes’ question and the averages question. Last sitting it was the construct a sofp soi question which completely threw me. The syllabus for these papers is immense, ESP for someone like me with a demanding job and kids, and this trend to foilingquestion spotting is making life more difficult.
Thanks to everyone in the forum, it serves it’s purpose in letting us know we are not alone !
R
June 10, 2010 at 3:19 pm #63230AnonymousInactive- Topics: 0
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never imagine that kind of paper … 🙁 ..
June 10, 2010 at 3:21 pm #63231June 10, 2010 at 3:27 pm #63232AnonymousInactive- Topics: 0
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@tejal said:
how did you calculate those probabilities? I was totally clueless about those..
I didnt include the interest payments because i think in NPV we assume that Interest is included when the WACC is used (coz the WACC already takes into considereation the interset on debt??)…Not sure if thats right though..I was totally clueless at first and left the question for the end.. i made a table of possible outcomes that will give a negative closing balance for period 2..
i did something like this..
{2000} in period one and {9000} in period 2 will give a neg closing balance.. 5000 in p1 and {9000} in p2 etc.. multiplied there prob and.. added each outcomes prob.. it just struck me in the end i dont know whether its rite or not..
*..i quoted you thrice.. using this forum for the first time..sorry about that*June 10, 2010 at 3:31 pm #63233sounds about right..i had left those two for the end too..since you’re not the only one who got that answer there’s a pretty good chance what you did was right 🙂
i wish i had thought of that…
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