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Sounds like the same as mine!
The hedging question I thought it was the other way round and it was something like 1.155$-1€ so think I’ve gone wrong all over that question it it’s the other way round!
I found the last question really tough, could figure out how to calculate the new cost of equity. Fresher head earlier on in the paper I might have been ok but that question under time pressure at the end of the paper was rough!
First attempt and last paper, sat the exam at 09.00 am
Had the set of questions with bond valuations and WACC, Sukuk bonds, acquisition using FCFE, and then interest rates swap and futures.
Can someone please explain how you dealt with arriving at Kd in equation one using 4 bonds and the credit rating spread? I’ve taken just a coupon of 5 and added credit premium to assume Kd is 5.5% and moved on.
Also didn’t manage to understand how to calculate the value of equity combined for the acquisition from the information provided, as the market cap was given, multiple and FCFE value. Neither valuation methods were obvious from the data given, so I would appreciate it if anyone could comment on my understanding.
Glad I did not see the interest rate swap question until the end as I have unfortunately discarded it as an unlikely contended and a rare occurrence, how wrong was I!!!
Would have loved to have a variant with NPV, duration, demerger, and currency derivatives, but oh well, stating to enforce my knowledge for June sitting I’m afraid
I had the same paper (unfortunately)…
For Q1 I believe you had to work out the spot yield rate for the 1 and 2 year government bond to give you a spot yield curve. For the two year bond this involved the use of IRR. Then for VIFs bond value you had to discount each years interest or redemptions at the discount factor of the spot yield + the credit spread for that year. This gave you MV of the bond which using IRR again gave you bond yield/pre-tax cost of debt. I think my answer came out at around 4.51% which felt reasonable although it took me way too long to work out that question. Also, have absolutely no idea if the above methodology is even correct to be honest!!
Wasn’t happy with the exam, it felt like I spent 50% of the time wondering how to answer the questions then actually answered them in just 90mins. Practically 30 marks on a bond yield/valuation of debt questions seems harsh and literally no questions in investment appraisal really threw me off as all resources I’ve used or watched have said that investment appraisal and risk management will definitely be tested on every exam.
It’s a miracle if I somehow manage to scrape 50 – so disappointing as I really felt prepared for this one but just crumbled when it mattered 🙁
My exact sentiments. AFN would make more sense of it were like SBL. One case study. But to do three case studies in 3 hours is torture!!!! The amount of variables is way too much and needs revising. It’s like they’re doing their best to have the least pass mark possible. I just don’t get it
Lucky you! You should’ve seen the one I had. Had to juggle 3 or more companies in each case study, way too many variables for 3 hours!!!
Thank you ,looked at the material and seems that these were 2 methods of bond valuation ,so seems that you have nailed it !
Did you attempt acquisition calculation question if you had it ,how did you arrive to the value combined to then get to max and min prices ?
Brampton was valued based on FCFE multiplied by its market cap:FCFE ratio. So I think the original value of Brampton was 4800m.
Under the best case scenario the ratio increased by 10% so multiplied this by the combined FCFE of the two companies along with the synergy of 25m. Based on this the value created was roughly 1400m which I stated was the max price they should pay as in theory you should never pay more than the additional value created. However they probably wanted you to refer to the price Shobdon were demanding as worked out in the first question (which I worked out to something like 1224m). Similar methodology for the worst case scenario which I think led to additional value less than the price Shobdon were demanding.
Frustratingly ran out of time and question 3 do my workings were so untidy and couldn’t answer the written parts in enough detail. Hopefully catch my exam marker on a good day where they can give me the benefit of doubt lol.
Thank you so much ,definitely few gaps for me to cover ! Best of luck to you and sounds you have just done it !
Can anyone remember the marks for the other paper
Q1 Cost of capital for 2 projects
calculate current cost of equity and cost of capital for co..
Q2 Interest rate swap AND future hedge
i) calculate the swap 4 marks
ii) work out the future hedge i think
iii) advantages and disadvantages of swaps instead of futuresCant remember rest
I got 110 contracts5.1% for interest rate swap
5.2% for futureQ3 Comment on MBI and discuss managers and employees thoughts ?
calculate share price
Comment on the offer compared to shareprice calculated at (a)I ungeared and didn’t regear as only equity financed
Comparing to all questions I have done the March 2022 exam was.quite ok, nothing extraordinary (surprisingly;)) but the time pressure is a disaster.
Is NPV for 17 marks, there is also some calculation already done in Question. so any idea about how much mark would be for npv calculation
What is about last question in Q1, employee issues, child labour, is it part of integrated reporting
I did the exam remotely. About ten minutes after it began, I got a Java script error and it crashed. I managed to use the chat (although it was functioning poorly) to communicate the issue. They reset the exam but then nothing happened after half an hour and the chat panel stopped working. I will be going to a test centre in future. It’s a shame because I have sat two previous exams remotely without any problems.
@djmoore98
Sounds similar to the numbers I got… how did you calculate the perpetuity value? I divided the 25m by the cost of capital (12%).
Also did you multiply the fcf value x 8 to get the market value?Can anyone remember the mark breakdown on the hedging question? The swap v futures adv/disadvantages etc
@Paula
For a perpetuity I think you go to your tables using the cost of capital, so you divide by the discount factor @ 12%, not 12% directly. Maybe this is what you meant though.Q3 Hedging mark allocation was
Advantages and disadvantages of using interest rate swap versus futures – 6 marksSwap calc 4 marks
Futures calc4 marksWeather any of the two instruments are suitable as a hedge against interest rate rises ? 6 marks
New manager confused regarding the function of treasury -7 marks
Plus or minus a mark either way 🙂
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