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Hi
Also had
Q1 NPV APV real options
Q2 Acquisition
Q3 Currency hedgingI’m absolutely gutted not having the time to finish the exam, which I think was doable compared to previous papers. Must have left circa 20 marks unattempted, sadly ?.
I did silly mistakes in Q3 which I realised at the end of the exam.
For people reading this, it is crucial to attempt many papers to time once you have covered the whole syllabus.
CBE format can make time management a bit more challenging.
Hi.
I don’t know exactly if ACCA want us to become super accountants but to be honest they should seriously readjust the timing for the optional papers to 4hrs instead of 3hrs:15 mins given the amount of info to assimilate.
For my part that’s my second attempt. The paper was fairly doable but again I ran out of time to the extent that I couldn’t properly write the report. Overall I attempted 70% and couldn’t do moist of the written parts in Q1.
Now that paper based is over there will be even greater challenges with the unreliability of the CBE platform.A few wobblers thrown in to Asrania question to slow things down.
The initial investment in l&b and p&m was split over two periods. 60pc time 0 and balance prior to yr2.
It mentioned that some materials were provided through USD by our parent company and that there was a contribution of 30$ on “some” of these. Didn’t quite understand that myself.Tax was delayed a year ( I think) and there was a tax treaty between the two countries. 20pc in Asrania and 35pc in US.
Anyway the while thing started to get out of control toward the latter parts of the appraisal and as I said, unrealistic with no time to consider the work that you were putting together.
Theory in the paper:
Treasury’ s role in handling economic risk.
Benefits and drawbacks of operating as a joint venture instead of opening a sub.
Assumptions of Npv.
Environmental impact on conducting foreign operations.
Strategic importance of merger.
Counter bid to avoid a takeover.
Benefits and drawbacks of OTC compared with futures
sarahcopeland wrote:Hi afmp4 – I got a loss in yr 1 but don’t think I did in yr 4 (but can’t totally remember).
Hmm ok thanks for the reply. Was tax being paid a year later
Yeah I remember doing a silly mistake. The minimum offer that target was asking was based on listed price but we had to do our calculations based on cashflow value of target.
Did anybody have a FX question with an AR of either 270 or 240 US Dollars. Do you remember what the rate was? 0,23 Dollars to Malaysian currency or vice versa? I had not much time left, and divided the AR by the FX rate… Cant get the one out of my head. I mean its a disaster to make a mistake on such a straightforward question… Thank you.
afmp4 wrote:Hi Nataly, did you get loss in year 1 and 4 on foreign operations ? edit: qoute didnt work
I didn’t get a loss as I messed up with component cost. However, I was expecting loss due to wording losses can be carried forward
palv wrote:Does anyone remember the spot rates provided for Q3 hedging question? Was it 1 MR -0.8xxx Dollars or 1dollar for 0.8xx MR? Seems I made mistake in ex rate application, but do not remember exactly the question((
it was 0.8xx $ per MR. I had around 96M MR for hedging options
Hi Nataly I agree with the figure 96mio. But I have a question if we choose the opposite edge in currency rates given, it will result in a small variation (in thousands level), does it lead to high marking loss??
(I mean selling price instead purchasing)It would also be valuable mr John Moffat’s experience on this
Thank you all 🙂
To Nataly
Component price was given, simply had to convert to foreign currency. Yes the wording assured me there would be a loss and there was. I skipped the foreign appraisal thought it wouldn’t come, so had no clue what to do dealing with cash back to US. Learned 5 marks are for that . Dealing with component price back at US is the only tough thing in the question.
Do u recall was the tax being paid same year or later?
Anyways I’ve been restless on this. No point in recalling. Can’t change a thing now.
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Was the net receipt the same for forwards and futures in the second question (set with Sundo Co)?
Also, was there a percentage decrease for the acquirer under share-for-share exchange in the third question?Re the foreign investment appraisal I think tax was payable in same year. That’s what I did anyway but I could’ve misread.
I’m just hoping I did enough and didn’t make too many mistakes under the pressure!
tejeswinijaladi wrote:Was the net receipt the same for forwards and futures in the second question (set with Sundo Co)?
Also, was there a percentage decrease for the acquirer under share-for-share exchange in the third question?Net receipt for forwards and futures were same in may calculations. and the receipt from options were less than forwards and futures.
In the question 3, yes there was a decrease for the acquirer.
afmp4 wrote:To Nataly
Tax was same year. Yes, component price was $250 which I converted but forgot to include in workings.
What did you get in APV? There were no issue costs? and also at which rate did you convert tax shield and subsidy? I assume we needed to convert ?- Topics: 0
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Yes that’s right. Thanks for confirming 🙂
Did you also get a negative NPV (around 1.27 million) before considering the real option and then a postive NPV of 305 million after considering the real option?tejeswinijaladi wrote:Yes that’s right. Thanks for confirming
Did you also get a negative NPV (around 1.27 million) before considering the real option and then a postive NPV of 305 million after considering the real option?I got a negative NPV, but I assume the cost of capital to be 12%.
I couldn’t calculate the wacc of the project myself, I spent around 15 minutes to calculate and couldnt manage it. what a waste of time for me. I’ve then just assumed wacc to be 12%.how did you calculate wacc of the project?
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Sorry to hear about that. I calculated the bond’s YTM and took that as the cost of debt. For cost of equity, I assumed the proxy company’s all-equity WACC to be the ungeared cost of equity and calculated the geared cost of equity using MM Proposition 2. Then I went on to calculate the WACC using the market values of Sundo Co.
The WACC was around 9.2% for me.afmp4 wrote:To Nataly
To Nataly
Yes there was no issue cost, hence that became part of the assumption that we needed to list down.
The first part of apv was easy. The interest being paid on loan into tax rate and subsidy benefit was 3 percent if I recall correctly into 80%. Because tax was 20 %
The latter part of apv was difficult as we had to apply discount factor to both subsidy and tax benefit and then convert to US dollar. A similar question in pilot paper 2013 by the name of Tramont is there.
But as I practised one question of apv with a tax delay of one year. It automatically guided to calculate Apv under such condition and 6 marks gone down the drain..which can come back and haunt me. What a silly mistake exam pressure can impose.
Additional value created was 167 for merger question.
Gain to target was 74 under cash flow method.
Gain to predator was 54% initially to which examiner wanted to know. How much amount to be paid if 60% is to be achieved.
Can anybody confirm any of the numbers?
I truly feel for you. I’ve experienced ‘technical issues’ twice now back to back, once at a centre and once remote session, and the only response was to withdraw the entry and refund the exam entry fee. It was truly frustrating to study for the same exam all over again and face the same issue again. And now I’m terrified of writing cbe’s because this issue can happen again and the only response from the ACCA Team would be to withdraw the entry and book for the next session which not only renders my effort moot but is also causing me to delay my other career plans.
I really do hope they find an alternative than just withdrawing entries. Hope you don’t face the same issue again. 🙂
Hedging question – Yes that was my understanding. The following may not be a hundred percent accurate as all from memory but hopefully is helpful.
The question listed two future prices, July and September. The difference was 0.0012 and one months basis was 0.0004. Deducting this from the September rate gave the same rate as the Forward rate. This threw me slightly as I had never seen this happen before so I did the basis calculation using spot rate just to check my workings were not wrong and it gave a rate off by 0.0001. This way also gets credit if you look at past papers however I stuck with the same rate above. My guess is they want to you to discuss in the discussion element of the question why you would pick either one if they gave the same rate based on the companies preference which is common in past papers when the forward and future receipt is marginally different.
Options I can’t remember exactly and the calculation is always much more fiddly so easy to make a mistake. Think I got around 86,000 MRH. The premium was in cents per MRH so you had to multiply the premium by contract and contract size then convert at the Spot rate as premiums are paid upfront and deduct this from your exercise price.
Share for share question – Which acquisition question did you have the one about a professional educational company looking to acquire two companies?
Question 1 – Foreign investment
Felt the 20 mark NPV part was a fairly standard question however I felt like I may have made some silly mistakes. Tax credit I just kept in the same year rather than offsetting against a future profit. I also didn’t read anything about the component being made by a parent, if this was true probably lost a couple of marks there. Not too hung up on this however as my understanding is one misstep does not effect your chance to get the following marks. Can’t remember exactly but my NPV was negative just by around 1M and APV was positive by around 1.5M.
APV was just the tax shield and interest subsidy, added to the NPV.
Assumptions on the above, a lot of different inflation rates their impact on costs and prices plus being used to calculate the future FX used to translate profits back to parent. Also the cost to decontaminate the land. May have missed out on one or two easy marks here as was very strict with time spent on questions so moved on.
Joint venture and subsidiary question was tough purely as I hadn’t seen anything on this, easy marks for those who had I would have though.
Ethics question I spoke about being a good cooperate citizen with regards to the land pollution, there was demand cooing devices from local businesses so meeting this demand is providing a useful service. Tried to beef this out with talking about how they should invest in the local area rather than transfer all profits back to the US.
Question 2 – Hedging
Very straight forward hedging question futures and forward rate being the same was odd but reassuring to see others got this. Feel like this was the easiest question to pick up marks if you had covered the topic.
OTC vs Traded options and Treasury role in risk management was worth ten marks and is a regular in most past papers.
Question 3 – Acquisition (Professional education company)
Found this question odd calculations wise. Hardly any figures given and seemed almost too simple when I was valuing the companies feel like I may have dropped some marks here.
That said there was a lot of easy discussion marks up for grabs here.
Advice to any future exam sitters, do not ignore the discussion parts of this exam. Worth half the marks and a lot harder to make stupid mistakes on these questions. If I was doing the NPV question at home without exam stress I would have probably done better, very easy to make stupid mistakes with a long winded calculation under exam stress.
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