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Hi
Did anyone have question C about divisible projects ! In part B you had to do an NPV for Investment Z, the NPV was negative though as there were no cash flows coming in just a reduction in electricity consumption ! Not sure if I quote got this question ?Hi,
I did get the same section C, from my understanding the ‘cash flow’ was the 27% saving from electrical cost.
I could be completely wrongYup – cash flow was the 27% electrical cost saving, less the 25% taxation. Think I got somewhere around $0.65m as the NPV.
That was such a hard exam I thought, even section A and B I found tricky! I think it’s definitely going to be a resit for me.
Just finished the FM exam got ratio question and Replacement NPV Question in section C
For the ratio question do you add the new Operating profit of 64.8 to the existing profit of 177 for the calculations? Same for the 360m investment?
Yes, had the same. Npv divisible projects, 27% are cash flow savings minus tax. There was a question about risk & uncertainty, sensitivity analysis.
Such a hard exam! The difficult ratios with different investments, sharia law financing theory, the divisible projects, part B had some tricky questions as well ??
I got that at first and then realised in the scenario it said that investment was required at the start of second year (so end of year one not in year 0 as it usually ihappens). That changed npv to 2 something for me.
Arrr yes I understand it was a saving but it was not cash coming in as such, it was still cash that we had to pay for electric but it was at a reduced rate !! Arrrr I think I will be doing this exam again . I found section C very tricky
Thank you, yeh I’m not sure if I did that last ratio question right or not as the information given was for current year however the new project was for next year but the options were for expansion so surely the expansion projects are on top of current figures
Can someone recommend other forums as well where there’s discussion about the march FM exam?
I agree with you Lisa, don’t think examiner was very clear there as of what they have expected us to do. It didn’t however state that electricity was only for this project alone and in what form savings would be received. I therefore assumed electricity was a cost that was incurred by entire company not attributable to this project alone. It did stated within scenario that npv was predicted to be zero based on assumptions that investment would be offset by the savings in electricity. Perhaps received in form of cash grant on which you pay tax? Doesn’t charge fact the exam was very difficult and scenarios had a lot of distractions and some things weren’t just obvious. I found section a and b very difficult and who knows maybe you nailed the multiple-choice questions and still grant yourself a pass, fingers crossed! : )
I had the same NPV question, it was quite tricky, I had a positive NOV of 4m, I just included the 27% as an inflow and the tax as an outflow. But I think I did the inflation wrong and the asset timing(placed it in year 0 when it should have been t1.
Also had the divisible projects, all I remeber is we needed 13m apportioned but one of the projects had 14m initial investment and NPV of 2.8M and this was a minus 200k on that specific project,so portioned against it. It should have had a total npv of 18.2m or 17.2m for divisible.
Did anyone else get this?I actually have gone mind blank.
The question I got had the 4 years of cashflow for NPV, no tax, IRR, Payback, Roce and Talk about the investment appraisal.Did anyone get this?
Junaid98 I had this question with divisible and none divisible projects and had similar answers but I’ve changed my answers on this last minute when I realised it said in scenario that project Z was mandatory due to government requirements to reduce co2 and 25m must have been used from the total 70m capital available so although the estimated npv by the company given in the scenario was zero I still included this in my calculation of maximum npv that could be achieved, basically this reduced my available capital by 25m. I made my assumption to clarify why I did that but not sure if that’s correct. And yes you right one project must have been apportioned the spent was 14 but only fraction was available.
Hello, which part do you replace in question 1? Is it benefit from obtaining discount in question 2?
Hi Bella, I had the same question with various investment appraisals, and talk about usefulness of these investments used by the company. I q31 I had horrible factoring and settlement discount.
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