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50 marks was ok, NPV of investment and cash flow forgone for parent company.
25 marks was analysis of financial position and statement of profit and loss-easy but too much time takes to do all calculations, valuation-25 marks-I found it very hard. Cash flow to firm-but I think I never practiced like this before. I am with a feeling that I will sit it one more time 🙁Yes I had the same.
Did well in Q1 which was ok.
Q2 was so much information and didn’t go the best
Q3 did okay
Mine was tough – q1 was a combination of valuation of debt, equity and capital, but using yield curves etc made it really tricky, then it moved into hedging using futures and a swap which was time pressured. Commentary sections were good tbf. Q2 was a bit different regarding calculating expected dividend using geometric averages and other info and then a detailed evaluation of dividend capacity. The final question was an absolutely awful business valuation. Couldn’t understand the requirement so will have scored very few marks for basic calculations but hopefully some OFR marks for then commentary and professional skills. Overall borderline … you know it’s tough when you look for your preferred question to ease into the exam … and there it’s not one !!!!
Mine was tough – q1 was a combination of valuation of debt, equity and capital, but using yield curves etc made it really tricky, then it moved into hedging using futures and a swap which was time pressured. Commentary sections were good tbf. Q2 was a bit different regarding calculating expected dividend using geometric averages and other info and then a detailed evaluation of dividend capacity. The final question was an absolutely awful business valuation. Couldn’t understand the requirement so will have scored very few marks for basic calculations but hopefully some OFR marks for then commentary and professional skills. Overall borderline … you know it’s tough when you look for your preferred question to ease into the exam … and there it’s not one !!!!
I thought the NPV question was so chaotic with the information provided – my answer was as chaotic but recognised the forgone sales but in the end I had so much negative cashflows I had nothing to apply to my 8% tax rate at the end with the bi lateral agreement – I know I messed up something but kept swimming- at this point was 1hr in with all the commentary left to go on Q1 – when I finished -(had to leave c and B part finished) I did wander if anyone managed to finish everything in the time given or if I was just struggling. Definitely was really tough Q1. by Q2 I was ready to tap out tbh. Q2 was so open on requirements it was a bit disheartening= got the trains. comparing the competitor etc and performance
I agree jayhelena- felt it was very chaotic, much more so than any of the practice papers! I found the whole paper challenging- thank goodness for the discursive train one. I think I picked up the majority of my marks there. Don’t think I will have passed this one!
I agree jayhelena- felt it was very chaotic, much more so than any of the practice papers! I found the whole paper challenging- thank goodness for the discursive train one. I think I picked up the majority of my marks there. Don’t think I will have passed this one!
Well done for not panicking and giving most of it a go. It really is a time pressured exam, and as much about trying to understand all the info and what’s needed. I really felt worried when I looked at all three question requirements and the amount of info. I just hope I pick up the professional marks and did enough on the first two questions to get me over the line with a part answered q3. Best of luck.
What ab m& a question, there was no share for share and no cash offer. Did u get question on why acquisition should not be done?
@Robert , was your exam 11am BST time?
Q1 was about related with 10 marks of calculation of cost of debt, equity and wacc with given credit spreads.
10marks were future hedge for investment and loan for swap
the rest was discussion.
I think yes q1 was good and i did okay.
Q2 was about acquistion with share to share offer which the company have high gearing. Additional value created wanted to divided as 70/30 – it was also okay – but they also want that mezzanine loan for cash offer, i messed up there. I did some discussion and calculations but not sure how it was
Q3 was dividend capacity but so complex and hard to define :/
no npv or apv or good hedging :/ Like nightmare
Fingers crossed we do ok :3 important thing is that we did what we could and kept going through it 🙂
There was no question on project appraisal in my exam. I thought it this was one of the topics that had to be included, along with risk management. Part A was a question on the cost of debt, equity and capital followed by a hedge and a swap, which was OK. The section B questions were atrocious. Dividend capacity and some random information about a potential acquisition. Appalling. Mezzanine finance? Pull the other one. But no NPV or APV question. I don’t get it. A disaster.
You had the same paper as me … I tink the cost of debt, equity and capital would be deemed the investment appraisal element … but I think that’s poor and it’s should be fully tested as indicated with a full question.
I made some good points about mezzanine finance and these were well explained, except for they were not specific to the scenario which I didn’t understand. Hopefully I will pick up some prof skills marks and commentary marks and maybe a few basic calc marks but I gave up on those and just used assumed amounts after a certain amount of time …. Felt disheartening but probably the right technique
they also did not give settlement date future rate for settling currency futures…
what did you do about that?
i just calculated 1 year rate through PPT and average it out for 6 months..yeah like how did you find out rate after 6 months for settling currency futures contract?
Anyone had any idea of how to counter the cost of debt and Market value of bond question today. The govt yield rates were only provided for 2 years while the bond was 3 years
They provided the outstanding basis so I believe they wanted us to use that to work out the lock in rate (opening futures minus outstanding basis) and then simply calculate the outcome using that rate. You don’t always have to calculate the gain or loss on actual movement in every question unless that asked for, so here you could just use the lock in rate. I would guess marks might be identifying the right type I.e. call to protect against a fall in rates (1 mark), no contracts (1 mark), calculating lock in rate (1 mark) calculation of expected receipt (1 mark).
On the 3 year bond you had the coupon rate and final amount so I think you had to calculate the price of the bond then use that and the expected cash flows to work out the yield to redemption. Then use the required yields from all three (after adding the credit rating basis points) to discount the cash flows on the firms bond to establish its cost of debt (IRR) and market price which could then be used for the market value of debt in the WACC etc. I suspect I made mistakes as I couldn’t remember what rates to use to calculate the 3 year bond but hoping I pick up method and OFR marks
oh i never thought abt lock in rate..
since outstanding basis point was stated was 0 what i did was i went to next part of investment analysis and using ppt calculated spot rates after 1 year and then based on that closing and opening given i calculated average for 6 months actual spot rate…
and since basis was stated as 0 i used that rate to settle futures also…
do you think i would lose points ?
so scared…I think you would get method marks for sure, if it was circa 4-5 marks and you got the other bits right still possible to score really well. Outstanding basis on the futures was given in the exhibit, can’t remember the amount but was more than zero. Doesn’t change the fact you can score well if you calculated the no. contracts, identified the buy/call requirement and calculated the amount of interest received correctly?
thank you robert…
i may have overlooked something then coz i saw they said basis point was zero so i chose the other method..dunno how could i be so dumb..
also do you by any chance remember how many questions were there in group A and allocated marks for each of them?Yeah or I may have made a mistake and you may be right ????? … either way marks will be there for the other bits and method. I just recall seeing two outstanding basis amounts next to each of the two futures provided in the exhibits and deducting the relevant one from the opening price … it did have the standard bits about assume basis reduces to zero and that there was no margin requirements so maybe that’s what you noticed… the joys of post exam evaluation hey ?.
I’m a bit hazy but here’s what I recall … something like 10 marks for calculating COE, COD and COC. The cost of debt was really tricky but cost of equity using betas, capm and then WACC should be enough to pass with any for cost of debt calculations / method a bonus. Then 10 marks for hedging the investment and loan (futures and swaps). I think if you’ve got the right type of contract for the futures, the no. Contracts and calculated the correct gain for and used the right approach for the swap that alone would score half the available marks.
The remainder of the marks were prof skills (10 marks) and commentary on the results of the hedge including limitations and assumptions (maybe 7 marks???) setting up a new treasury dept (maybe 7 marks???) and then (6 marks) commentary about using project a specific cost of capital, how to improve the firms credit rating and using the swap rate as the firms overall cost of debt.
My reflection is that the key this section and scoring really well was to nail the commentary and prof skills marks which on reflection were there for the taking, and do your best to get the easier calculation marks which were harder under pressure.
If you could pick up 8 prof skills marks, 16-17 on commentary you’ve already passed the question, so with only half marks for calculations (say 10 out of 20) you’ve given yourself circa 34-35 marks and most likely a pass for the exam even if the other questions were not great.
So if you followed a good report structure and did well on commentary you’ve likely done better than you might be thinking?
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