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Foreign NPV – section A (50 marker) and it was a biggie but no funny adjustments so it was exactly like the few papers I had already done.
Business valuations – section B (25 marker)(PE/ cash flows to firm & weird hotel rooms method). The first two method were legit and the latter was made up so we had to explain which method was best for the business etc. Numbers were straightforward again as I had covered this in my revision earlier in the week so feel chuffed here!
Currency risk management (25 marker) – had hoped the interest rate risk would be tested but the FX element was tested instead but no dramas my FX knowledge is just as good as the interest rate one. They tested FRA, futures and options and we had to discuss which was the most appropriate method as one of the directors viewed options as the best one! (It wasn’t when I did the workings)
Time management was top too – started with the 25 markers and was done with both of them on time and moved to section A and like I said earlier was surprised that workings weren’t too hard.
Fingers crossed – it’s my last paper and I need this to be a pass so I can relax for rest of my life haha
based on the calculation the currency option was not the most viable option but what i stated is if the currency moved in a positive direction they had the option to not exercise compared with forward which is a fixed rate and the futures which is has basis risk attached
@no1lover – yep! I went with the same approach in the discursive bit.
Once I left the exam room I realised I failed to mention that with futures there’s margin payments to consider, so lost easy marks there. 🙁
But in the 3rd quation part A we have to do just the calculation ya without any report as they state you don’t have to recommend .
@muhanned – you’re correct but in the second part of Q3 we had to discuss the director comment about options whilst supporting our argument with workings from part A.
Got the same set.. but I believe in the forex question.. they had mentioned not to provide any recommendation on which is the better option right.. since the management has already chosen options.. instead we were asked to comment on the suggestion made by the director
I think I did a blunder in merger n acquisition question, I went to bootstrapping method by using pe ratio. I don’t know why i didn’t understand the requirements at that time, probably due to time pressure, in fcff after deducting value of atticus 2088, my ans was in negative. Dont know what will i get marks or nothing
Does any one remember what examiner asked for 3 marks, disadvantages of organic growth or disadvantages of acquisition???
You’re right – no recommendation was to be provided but the discussion about director comment was to be supported by the workings.
Hi, is there anyone here?
I wanted to check if my answers were correct for foreign cash flows.
It was a question called Kuta and my cash flows from Kuta were $45,000 before adding US cash flows (additional 12% tax on taxable profits and components’ contribution). And I got around $2+ million base case NPV after combining Kuta cash flows, US cash flows and NPV of license.
In the end, the APV was $5+ million plus.
I was confused with this question because I didn’t identify nowhere in the question where the Discount rate given to appraise the project was equivalent to the Ungeared cost of equity. I computed the financing effect separately and showed by NPV calculation separately so I hope I get points for that. With that said I cant remember my figures i got but the additional tax was yes 12%.
Hi. Thanks for your reply.
I just used the discount rates (two) given in another exhibit as the discount rates to appraise NPV (foreign) and NPV (US) particularly.
If I’m not wrong 13% for foreign and 9% for US.
Yup, I agreed on other things you said.
Yes i used the 13% and 9 % but it said for NPV. So i took the subsidized loan information and computed the financing effective separately. **Fingers crossed**
My formula for perpetuity was wrong for the license , instead of CF/R i did CF/1+R which is practically formula for PV first year.
Exam stress.
i had CF/R first later got confused and changed to CF/1+R.
i didnt see the requirement to calculate the APV even though the financing info was given.
All i did was calculate the PV of cheap loan using the cost of investment. hope some marks are given for efforts.NPV i did for both rates. domestic and foreign.
All above relates to Q1.
Hi, for this question (Kuta), if I recall correctly, the mark allocation is as follows:
– 8 marks about IMF and political opposition
– 19 marks for calculation (CFs from the foreign country, US CFs, base case NPV, and APV)
– 7 marks for approaches, discussion, assumptions
– 6 marks for TP
– 10 marks of prof marks
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