*** P4 December 2014 Exam was.. Instant Poll and comments ***

It was 90…

Agreed q3 was easy and q2 was doable but spent so much time in q1 that I did half of q2 and half of Q3. Seems the examiner is not trying to test understanding of the actual, but how fast you write. For those who actually know how to do the questions and can answer it correctly if it wasn’t so rushed, lose out compared to those who just ‘wing it’ to get half correct answers. What’s the rationale behind this and what is Acca or the examiner trying to do? So so ridiculous.

For q1 I calculated the probability of each scenario (scenario 1, 60%, scenario 2 25% and scenario 3 15%) and took a weighted average of npv.

Yes I calculated a real put option value. What was the conclusion in part c 3? Was the acquisition beneficial?

I have never written an exam this hard in my life!!! Q1 was HORRIBLE. What was that about the MP being multiple of 7.2 and the combined Freecashflow increasing to 7.5??? And then there was two different probabilities with two decreases in cash flows??? Oh my God!!!

I saw the put option BUT it gave me a negative figure by the time I was done with the value of the call option, I didnt bother to complete the put option! My figures were just going bunkass today in that Q1. God knows I seriously need help!

For part 1a, please was that revenue, cost and financial synergies?? The reason why Nahara co would want to diverfisify risk and acquire undervalued companies?

As per WACC combined, I didnt know where it fitted into any of the requirements, nevertheless I calculated it still.

If they said this examiner is better than the previous one, then I must be missing the correct definition of ‘better’ cos I thought it meant questions will be ‘doable’!

Enough said!

@nabiil said:
Can someone just recall me the question parts in number 3 please.

1st part was on calculation of missing info…then…

something about legal risk on taking drughi project. I made that sh*t up. lol

Also about why the co would want to be set up in the EU free trade zone.

I am sincerely gutted! I studied so much I thought what question will they bring that I won’t be able to answer? I was soon to be proved wrong! Indeed nothing prepares you for the level of difficulty to expect in the P4 scenarios. I can’t seem to get over that Q1.

@brizraj said:
Hi Felix
Refer to the examiner’s answer for Dec 12 Q1 Coeden Co
Same approach was required. It is some sort of weighted average

Thanks, meaning I need to sit for the June exam. my approach was
Beta Asset^2 = Beta non-lux^2 + beta lux^2

never thought that it would be as easy as weighted average the beta.

So many topics which required long detailed calculations were covered in Question 1. The examiner made it as difficult as only possible. Apart from calculations which we are expected to be able to perform under the syllabus, we had to find out some numbers for this calculations in the mess of unclear info, make guesses what the examiner really wanted from us under the examination time constraint. In question one it was unclear whether to discount the project at cost of equity or to use WACC. At first I discounted cahflows at ke, but then I changed my mind and calculated WACC. I stopped several times during question one and thought that I might had been doing something wrong… Question killed my brain and motivation to go on. I started question 2 and did not even attempted any other question.

@vinograd said:
So many topics which required long detailed calculations were covered in Question 1. The examiner made it as difficult as only possible. Apart from calculations which we are expected to be able to perform under the syllabus, we had to find out some numbers for this calculations in the mess of unclear info, make guesses what the examiner really wanted from us under the examination time constraint. In question one it was unclear whether to discount the project at cost of equity or to use WACC. At first I discounted cahflows at ke, but then I changed my mind and calculated WACC. I stopped several times during question one and thought that I might had been doing something wrong… Question killed my brain and motivation to go on. I started question 2 and did not even attempted any other question.

I think it should be Ke as the cash flow given were FCFE?

@hale said:
Was it correct? As I remember 50% that the return would be 40%. If it’s the high case, then 20% that return in Y2-4 would be 40%. Anyone please confirm and tell me how you did it?

Can’t say if it was correct. But I took 75%*80% for probability of the first scenario as that would be the probability of both normal growth in the first year (100-25%) AND (multiply) normal growth in the second year (100-20%)…

Made up a standard deviation figure for input in the option pricing model. No time to think!!!

Where does the put call option come in here and how is it used? I did not know what to do with the probabilities, I completed ignored since that would be under expected valued and probability analysis.</blockquote

The put option was the Lumi offer, means option to abandon(put option) and sell to Lumi for $50m (I think)

@kamdarvivek said:
Decision trees, black scholes all in q1???

The confusion is that most questions we did in revision or past exams you have to calculate the FCFE from sales revenue/op cash flow less interest etc.

They already gave the FCFE! On top of that there was ROI and changes in FCFE.

Where does the put call option come in here and how is it used? I did not know what to do with the probabilities, I completed ignored since that would be under expected valued and probability analysis.

The put option was the Lumi offer, option to abandon and sell the project to Lumi for $50m (I think).

Also i had lost time to calculate the market value of debt, as the interest rate was 5,4 but the market rate for B rated companies was 4,8……

I really cannot understand what is this examiner think we can do in 3 hours .. this exam is disaster in all the word meanings …and cannot be completed in 3 hours