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My exam was a disaster. I felt like i did not study anything.
Had a question asked to calculate tax rate at which npv is 0
I ended up calculating irr bevause i dint know how to calculate sensitivity for tax rate. Let me know if someone got the similar question?
Alot of theoretical mcqs.
Everything was from risk management and working capital. Tricky questions.
Too much theory marks for section CSame here. I got the sensitivity Analysis too. Question below
2a. Calculate Sales Volume and Discount Sensitivity analysis. (7 marks). I personally found this challenging.
2b Calculate and Discuss impact of tax on SA (3 marks). Couldn’t answer this as well. I guess 2a affected my confidence on this part of the question as well.
2c Discuss on the comments of Llywn Co CEO on Sensitivity Analysis. (6 marks). The CEO was discussing on the limitation of SA. So I tried to buttress what he had already said by briefly talking on the Disadvantages of SA. Listed 3 points and 2 statement each per points.
2d. Discuss limitation of llwyn Co on accessibility of finance. (4 marks). I made a generic comment and discussion on this. Cos there was no information related to this question on the scenario. Asides the company didn’t want to source for additional finance either Debt or equity. So I just listed two points. Business Decisions and High Gearing. Tried to build on those two.
Asides this. I found part 1 of section C easy.
Section A and B were tricky!!! I really do hope for a pass
Pecking Order Theory. I believe –
1) Retained earnings
2 Bank Loan
3) Stock Loans
4) EquityI was surprised by the presence of Bank Loans but decided that Bank Loans are shorter than Bonds and cheaper which will reduce the WACC.
Am I right?
For the question about limitation for finance I commented on hard and soft capital rationing as the economic climate was volatile and their sales forecast was said to not be accurate
Say less. Mine was also a disaster. I got the same question and I just blanked. I went to write non-sense in the theory section of the question. I’m back here to study and revise just say its a resit. I cant lie to myself at this stage. All the best with your results and I hope you make it past 50% no less.
also had the analysis re discount, volume and tax.
for the volume i have used the contribution and removed the tax.
for the discount i used IRR
for the tax i just changed the tax rate to see when it made the NPV £0 I have entered the NPV calculation in excel thoughthe section c was horrible in that sense but also section b and a weren’t easy!
some of the questions never seen before, and i went i entered the exam i felt very confident..
Does anyone know if I can sit FM and SBL/SBR together in September (if I don’t pass FM this time around) just wondering what happens if I pass the strategic but fail FM would I still be awarded the mark for the SBL?
Pecking Order Theory. I believe –
1) Retained earnings
2 Bank Loan
3) Stock Loans
4) EquityI was surprised by the presence of Bank Loans but decided that Bank Loans are shorter than Bonds and cheaper which will reduce the WACC.
Am I right?
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Yeah i had the same question and this is the exact order i put so hopefully its right! pretty sure equity is the lowest in terms of financing while retained earnings & loans were further up th chain due to their lower costs.
Feeling grateful i missed that sensitivity analysis 20-mark question some people had. sounds ridiculously tricky. For section C i got a mixture of working capital management (Cash Operating cycle/Miller Orr & Discussion on trade recievables & NPV/investment apprasial+capital rationing.
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Today’s FM Paper was better than OK. I shall pass
Thank you Open Tuition for your spot-on FM Notes.
I also got the same Section C
a) Sensitivity analysis on Sales Volume, Discount rate and then tax rate at which NPV=0 (IRR was coming at 18.5%)
b) The other one was on decision of usage of factoring. Not sure if we should have used factor or not? And then discussion on Working capital long term and short term.Section B had
1. Difficult question on two sisters owning an unlisted company. Brother wanted to invest using debt etc. Found it diffcult. It had a Qn on mushakara.Theory was super confusing
2. Another case on forex 6 month loan interest payable in Pesos Vs USD.
Money market Vs Forward.Fingers crossed, Hope they give grace marks. Last time failed at 44 marks 🙁
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Got the same Section C questions too. No sensitivity analysis questions
I think loan stock like debentures are secured so cheaper than bank loans not sure if its for this specific theory tho.
The sensitivity analysis is very hard for me, I have thought very hard but haven’t got an idea to calculate the sales volume of year 4, the discount rate of course.
The question is quite tricky, I have already studied for quite long time on it, but I think I will fail again….
Yeah right even I got 18.5. but then later used the formula (coc-irr)/irr to find the sensitivity.
Also for the sales volume i first calculated the contribution for all the cars and then used the sensitivity formula.
Did anyone know how to calculate the preference share part ? What was the ans tho ?Pecking Order Theory. I believe –
1) Retained earnings
2 Bank Loan
3) Stock Loans
4) EquityI was surprised by the presence of Bank Loans but decided that Bank Loans are shorter than Bonds and cheaper which will reduce the WACC.
Am I right?
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Yeah, I had the same question and this is the exact order I put so hopefully it’s right! pretty sure equity is the lowest in terms of financing while retained earnings & loans were further up the chain due to their lower costs.
Feeling grateful I missed that sensitivity analysis 20-mark question some people had. sounds ridiculously tricky. For section C I got a mixture of working capital management (Cash Operating cycle/Miller Orr & Discussion on trade receivables & NPV/investment apprasial+capital rationing.
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Regarding Section C – Cash Operating cycle, I used the cost of sales to calculate WIP and Finished goods, but I think should have used the cost of goods. Can you remind me if it was mentioned that the Material purchased on credit was 90% of the production costs?
Regarding Section C NPV calculation for a project (not the PI) – It was said to ignore the tax (corporate tax and tax allowable deprecation)?
Section C was ok for me
I had to calculate NPV with no tax but some inflation adjustments. I think I answered decently.
Then I also had to calculate between 5 projects divisible and which are the best investments project A and B were “mutually exclusive” I didn’t know what it meant at the time but I assumed it meant that the projects couldn’t be invested in at the same time judging from how close their NPV per cost of investment was. (I searched later, I was right)Section A was okayish and section B was a disaster.
Thank you Kish for the NPV not tax answer – makes me happy.
What about the Cash Operating Cycle – Do you remember WIP and Finished Goods? How did you calculate them?
Hi everyone,
Fingers crossed for all!
This was a resit from a miserable fail of 37% in March and to be honest, I feel like this time round I went in with a lot more knowledge and better preparation.
However, some of these questions just completely threw me and I still do not think I have done enough for a pass.
The 2 option questions I find sometimes very difficult as I’m usually always guessing the other option & I know you don’t get any marks if only 1 option you have selected is correct
I lost an easy 2 mark question with regards to the pecking order theory, I put the same as others in here which is correct (once I had the chance to google), but stupidly changed it in the last 30 seconds as I had it flagged
In section B, I also had the question on two sisters owning an unlisted company. Had no idea!
Peso vs USD question
In section C, I had an NPV question with inflated sales, Miller Orr (total guess even with the formula provided – did not revise this at all), Working Capital etc.
I hope I have done enough, but I’m not sure I have… the 6 week wait is torturous!
Question; Does anyone continue to revise during this period incase of a fail? Just to keep the momentum going?
It has been helpful reading everyone’s comments as I also found the exam so hard. I had the sensitivity question on sales volume, discount rate and how much the tax would need to increase. I used IRR and also got 18.5%.
I got the section B question about the start up with the sisters and the brother investing it was so tricky!!
I found the section A questions hard too.
I’ve never flagged so many questions in an exam before and I felt some of the questions didn’t make sense!!!
Did anyone get the section A question about cost of equity and were given the beta from the proxy company and it gave their asset beta? I calculated the equity beta of the proxy company and used that but none of the figures matched and now I’m thinking should I have used the asset beta.Similar to the Q above, does anyone study whilst waiting for results as I’m sure I will need to resist?
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