*** June 2022 ACCA AFM exam – Instant Poll and comments ***

I was running out of time and i put random figures and evaluated them on first question will i get atleast a mark for those random figures

Morning siting ,same questions as ale wrote
On the face of it was not difficult ,but messed up with interest rate calculations ,although the theory bits were were reasonable !
Question 3
I got —1.5 NPV and -1,155 VAR so 95% worst case downside risk was the total of the two ,then for 6 marks was the commentary regarding why NPV is underestimated ,so said they should consider real options etc – anyone else got similar figures ?
Question 1
Special dividend and wether to do one is suitable in this scenario as they have no plans to invest in projects which would generate + NPV ,also this will deter from takeover ,but shareholders might have divided goals – div yield or cap gain

Share buyback is similar ,avoids dilution

Question 2

Interest rate options adv and disadvantages – good is rates go up but large premium upfront

The exam was time pressured, I equally did not manage to finish but concentrated on working out easier marks e.g. I did not revise confidence level and I didn’t want to stress so I left it out..

I started with last question (interest rate hedge) then second ( NPV/sensitivity/confidence level) and did q 1 last ( company Valuation using Assets/FCF valuation method), All in all, I feel the paper was fair. Just hoping for the best,

Good luck to everyone!!!

I’ve done 5 timed mocks and 30-40 practice Qs and this was BY FAR the easiest paper (version) of AFM I’ve encountered (first time sitting).

Q1 – M&A – calculate combined co WACC, value to shareholders, change in % on shares, evaluate share for share exchange, M&A bid defenses strategy and dividend vs capital gain discussion

Q2 – Standard APV and discussion why APV is better than risk adjusted cost of capital approach

Q3 – Derivatives – Forward, futures, Money Market (i can’t believe i dodged I/r hedge let alone options, swaps and horrible collars).
Q3b) Illustrate with examples what a futures margin call would look like with changing closing rates given

A very good paper with luck! Finished just in time. But I can see how different everyone else’s is and would’ve struggled under some of the question topic combos you guys mentioned.

I was typing til the very last second and it timed me out before I could press submit exam – my exam will still be submitted right?! Surely I’m not the first person ever to do that

We were told at the exam centre that it the time runs out all you needed to do is to press exit at the end

The questions seemed very straightforward on first read of the requirements and I thought I was surely going to pass, but then finding the information in the scenarios took me a long time and I had massive time pressure issues.

I got Q2 and Q3 done well, but then only had an hour left for Q1. Was still feeling good, but spent a long time figuring out how to get the WACC and didn’t get much else done. Proobably answered 65 – 70 % pf the paper, so it will need to be mostly right. Who knows. Feel like I might have blown it.

I understood and was able to attempt all three (3) however didnt finish any question. I believe I attempted 70% doubt its enough for a pass. Two much time was spwnt on question 1.

Paper was okish, the theoretical questions were kinda generic. I wish I had read about the regulatory framework regarding principle of equality and board nuetrality. Calculations took time and it was too time consuming. I had to leave almost 10-12 marks 🙁
I am not sure if I should start preparing for a retake or wait for the result 🙁

yes you are corrected. there was too much emphasis on the cahsflow. Also, i think once the combine asset beta was calculated, then i regeared it to combine equity beta and than plunged it to the camp to get the combine cost of equity since which was than used to ge the Combine WACC. i think everyone lost fair amount of time on that.

I combined both equity values when using MVE for combined co WACC. MVD was Cermann’s. Billie’s equity beta = asset beta since debt = 0.

So combined asset beta can be weighted averaged according to the question and then solved for Bg using Bu = Bg x MVE/(MVE+MVD(1-T))

Use Bg in CAPM and solve for ke.

My ke for the combined co came out to be exactly 20.000% on the dot, with kd being (3.5%x1-T). I got 14.2% and rounded it to 14% WACC.

For the cash flow NPV post acquisition, did anyone think “1 year after acquisition” of Billie is actually year 0 for the combined co? It felt like a trick question with the timeline

anwarkhan786 wrote:How did you come to the calculation of combine WACC? the aquiree company has equity beta but no loan, which means that should be considered as their asset beta?

Thank god !! My calculation was correct.