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Dear Sir,
I am not able to arrive at the correct answer of Opentution Mock Mcq’s # 10, 12 & 19
Also can you please clarify why option 3 is correct under Mcq # 17
Many Thanks.
Sorry, but if you had read the page before starting the mock test you would have seen that if you need workings then you must copy the question here.
The reason is that the test is selected at random from a large bank of questions, and every time the test is attempted you are likely to get different questions (and in a different order).
I have therefore no idea at all which questions you got as 10, 12, 19 and 17!!
If you copy the question here then I will explain the workings. (To save you time, if you look back in the forum you will likely find that I have already answered to other people on the questions that you are having problems with.)
Dear Sir,
I have searched the forum and found several question answer.
Many Thanks but unfortunately I was not able to find the answer for these, the questions are as below :
Question # 10
A project requires an investment of $ 24,000 at time 0, and generate an inflow of $ 5,000 per year for 8 years (with the first inflow incurring in one years time)
What is the IRR ?Question # 12
The current spot take of US $ against the £ is $/£ 1.8420
Interest in the is 5% p.a, where as 4% in the UK
what would you expect the 3 month forward rate to be.Question # 17
Why in time of growing demand it is beneficial for a company to have a high level of operational gearing ?Q10:
For the NPV to be zero, the present value of $5,000 a year must be equal to $24,000.
Therefore 5,000 x (8 year annuity factor at the IRR) = 24,000
Therefore 8 year annuity factor = 24,000 / 5,000 = 4.800
If you look along the 8 year row in the annuity tables, you will find the interest rate giving the nearest to 4.800 is 13%
(You could also use the normal “two guesses” approach, but it would take longer and only ever gives an approximate answer)
Q12:
The three month rates are 3/12 x 5% = 1.25%; and 3/12 x 4% = 1%
Using the interest rate parity formula on the formula sheet, the forward rate
equals: 1.8420 x (1.0125/1.01) = 1.8466Q17:
Because as sales increase so too will variable costs, but fixed costs stay constant.
The more the costs are fixed (and therefore the lower are the variable), then the more the profit will increase as sales increase.
(To see exactly what I mean, best is to watch the free lecture on gearing – I show some numbers to illustrate what happens)
Many Thanks Mr.John
Can you please help me with below question also
X plc has a dividend yield of 8% and dividend cover of 2.4
What is the P/E ratio ?Formula = P/E ratio x 1/Dividend Cover = Dividend Yield
How to use X plc question using this formula ?
The formula you have written is not quite correct.
PE ratio = MV / EPS
1 / PE = EPS / MV = (divi cover x dividend) / (dividend / divi yield) = divi cover x divi yield
So your formula should read: PE = 1 / (divi cover x divi yield)
So for this question:
PE = 1 / (2.4 x 0.08) = 5.21
Dear Mr.John,
Is there any list of formulas for such combine rations on opentuition ?
As I find it very difficult to combine the ratios according to the data provided in the question.
Or at least can you share the combine formula of Earning & Dividend Yield & Cover.
Many Thanks in advance for your precious time and help.
Can you help me in below Mcq also
A machine cost $ 72,000 and has a maximum of 3 years. The running cost of each year are as follows:
Year 1 7,200
Year 2 9.600
Year 3 12,000
the estimated scrap value are as follows:
After Year 1 : 24,000
After Year 2 : 16,000
After Year 3 : 9.600The cost of capital is 15%, calculate EAC if machine has to be replace after 2 years.
I got the answer of $ 72.972, can you please advise what I have missed.
Regarding the formulae:
No – there is no list. The reason is that the examiner deliberately tests that you understand rather than that you have just learned formulae.
He expects you to know what the PE ratio, dividend yield, dividend cover etc. are (and they are all covered in the lectures. However if he does ask a question like the one you originally asked, then he can ask it in lots and lots of different ways – it would mean learning lots and lots of different formulae!
If there is a question, on ‘combining’ them, then there is unlikely to be more than one, and it will be there to check you understand what they are individually and that you can then ‘combine’ them yourself.Regarding the replacement question:
This is exactly the same question as Example 2 of Chapter 9 of the free Lecture Notes (except that the example asked for the EAC for all three replacement possibilities – not just for replacing every 2 year).
You can find the answer to it at the end of the Lecture Notes (and, if necessary, watch the lecture where I go through it and explain the steps).
(What you have calculated is the present value of just one machine – you have not continued and calculated the equivalent annual cost of keep replacing)
Dear Sir,
could you please help with the following Q19 from the mock exam (revision kit):
The US$/European € spot rate is quoted currently at 1.9612 – 1.9618 $/€. The 3 month forward rate is quoted at $0.0012 – 0.0006 premium in Europe. A US company is expecting to receive € 2.5 million in 3 months time and would like to hedge this using a forward contract.
What will be the US$ receipt in 3months time?
A) $1,274,730
B) $ 1,273,950
C) $ 1,270,123
D) $ 1,275,510According to the answers form kit, the correct answer is under D).
However, I cannot get this number, my results is $ 4.903.000 (because I have multipyed EUR 2.5M with the fwd rate 1,9612, but in the answers EUR 2.5M was diveded by this rate).Please if you can help.
I do not have the mock exam, but assuming that you have copied the question correctly then the answer is wrong.
You are correct – they should have multiplied!
(I don;t know which kit you are using, but there are several errors in both the BPP and the Kaplan kits 🙁 )
Thank you very much for your quick answer!! 🙂
I was afraid that I’ve lost the “logic” in calculation technique :).It is the mock exam 1 from the BPP revision kit valid up to June 2015.
Once again, thank you very much!!
Best regards!
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