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

@singintheblues said:
Entered the exam with all bases covered but was definitely cooked after p7 previous day so this is moot! HOWEVER, overall I felt it was a very unfair paper.a) Q1 was poorly worded and some of the terms used were untypical of syllabus eg FCFE times b) the probability theory was hardly covered at all in my syllabus notes.c) Q2 was confusing, for example the basis on the option future and the fixed/floating choice on the swap. Throw this in with the existing time preessure and it just makes it very difficult. This is my first time sitting this paper and key lesson is do Q1 last. I couldnt really make any decent attempt at Q1 butstill spent a large chunk thinking Iit through. When you’re in this position in an exam its demoralising. Did Q2 but didnt have time to consider a collar, just the cap. Q3 was fine. I really like this paper, its the best course on the ACCA syllabus by a mile but I think this examiner needs to think and make an effort to give students a fairer. The simple things are all wrong!!

Leo, truely said. Its the best syllabus on the whole course. I really enjoyed learning this paper.

I think it is like this. The market price of 7.5 to multiply with the number of shares. That is 12000. Divide that by 7.2 which gives 1667, which is the free cash flow to equity of that company. Then find the FCFE of the other company and add the 400 synergy benefit. Add up all the three and multiply by 7.5. This gives about 19000 or 17000.approx (I am not sure)which is the FCFE of combined company. So increase in value is 17000 less 12000.

the p4 examiner have no intentions of passing the candidates… i mean why the hell he complicate so much?? i was hell prepared for p4 but in the end it was all just a mess…. an extreme one

First of all…i apologize to the examiner that I was not prepared at all to write this exam (by this I mean zero studies / preparation).. but i deeply sympathize with my fellow colleagues as after not preparing for this exam i too felt very confused with the Q1 requirement..I actually thought wow this is the first time i used almost all the given formulae..

We should also prepare a student report with our feedback on these exams..submit them after every exam to the ACCA..

Feel disappointed that I could not give enough respect to a paper I was interested; Definitely can expect a FAIL although i had plans to pass it this time..

Anyway it was good exam experience and hard lessons learned!

That is why you are suppose to start within your section B questions first there is usually at least one you know you can get full 25 marks for, for example question 3.

@ajs90 said:
I decided to do section B questions first and managed to get 3&4 done to what I hope is a satisfactory standard. I didn’t have time for, I think, 3c relating to legal risks so i skipped it and moved on to question 1 with 90mins left.

Question 1 – wowza what a nightmare. The question was closely related to one of acca’s technical articles –> https://www.accaglobal.com/uk/en/student/acca-qual-student-journey/qual-resource/acca-qualification/p4/technical-articles/conditional-probability.html

I didn’t manage to finish the assessment of the project with the offer to sell the project after year 1 however I’m pretty sure that this was not a real option question. A lot of people will disagree with me on this but if you read the article linked to above it shows how to assess an offer to sell using probability adjusted cash flows (you look at the probability adjusted present value of cash flows after year 1 and then compare this value to selling the project – the article explains this much better than me). There was no standard deviation in the question so there was no way to calculate the value of a real option.

As I said though I didn’t do any better as I didn’t finish the last 2 parts of Q1 (which will also have cost me at least 3/4 professional marks and caused me to fail I’m fairly certain). My issue is not the difficulty of the question, it’s the time constraint. I really struggle to see why ACCA papers, particularly at the professional level, are so time pressured?! Surely examining someone’s ability to sit and think through a problem is more valuable than assessing how quickly than can get a semi-sensible scatter of relevant numbers down. Giving more time would improve the quality of answers, ensuring that candidates are assessed on what they know rather than how quick they can work. Surely it’s better for an individidual to work a little slower but work in a neat methodical manner providing sensible logical and useful advice for the given scenario. No doubt a reduction in time pressure would also make the markers job easier as well because answers could be presented better.

Even before this I was considering writing to acca to get an understanding of why we are given a tight time constraint, I don’t see much value in it. If candidates have the knowledge but it takes them longer to get it down then I think they deserve to pass, there should not be a punishment for being a slow writer or for being having a bit more thinking time. In the real world it is a much bigger error to steam in to your work and make mistakes than to stop and take a few minutes to really consider what you need to do and how best to present it. This reality should be reflected in the ACCA exams.

Super frustrating to know more than you have time to write.

I’d like to know what others think on this.

AJ

I agree with your reasoning for Q1 and hopefully we get passes for that line of thinking! 🙂

Supergage if u use 77%….it was still not possible for g to be bigger than ke. Ke was given as 11% ….so if u use g according to ur cal should have been 11%* 77=8%….if u uses 23. Something % g would have been 2.4 I think

@jarix said:
It was not compulsory to use blackshool in this question bcos attempting it would be like difficult to ascertain the volatility. But if u have used it fine and also if not fine. The examiner was testing expected values and decision tree for the cash flows.
Below is the comment of the examiner in one of his articles

‘A commonly used way of evaluating decisions is via the use of expected values.

An expected value summarises all the different possible outcomes by weighting the possible outcomes by their probabilities and then summing the result.

Problems where one or more decisions have to be taken can become more complex and may require the use of a decision tree, with expected values being used to evaluate each of the decisions.

A decision tree is a diagrammatic representation of a problem, where the decision maker needs to consider the logical sequence of events.

Since one event may depend upon another, we may get situations where event one has a certain probability of occurring and event two, which depends on event one occurring, has another probability of occurring. In such circumstances, we have a situation of combined probabilities

Eg if event one has a 0.6 chance of occurring and subsequent event two a 0.75 chance of occurring, then overall the probability of both events occurring is:

0.6 x 0.75 = 0.45
ie a 45% chance of occurring.

We shall look at such concepts in the following example, which demonstrates how techniques acquired in Papers F5 and F9 can be used in the Professional level papers.

@jarix i did not use the bsw model..i failed to recognise it..but i used the expected value instead..i feel kind of relieved after seeing u saying this hehe

the disastrous paper. i was unable to identify that we had to use blackscholes in the absence of deviation later of my friends told me that we had to use blackscholes LOL. secondly Q1. was too long plus the data was too scattered that we had to go through the whole question a lot of times in order to understand that what exactly the examiner is asking us to do. i was very disappointed. very unpredictable paper.well hope for the good.

June for sure..for the third time……greatest battle ever 🙁

This is my 7th Attempt on P4..i didn’t expect such a paper this time…

my question is, is it practical to do the first question within 90 minutes..we need 30 minutes of reading time to understand the question. what a hell lot of information on the question..

I humbly request open tution to forward all this comments to ACCA an examiner to make them understand what the students feel and be flexible on the marking scheme.

Thanks..

Anyone know if we will be able to get model answer or a tutor’s attempt at the paper from anywhere? This is my last paper and I’m desperate to gauge how well I’ve done!

My attempt was a bit of a scatter gun approach, and because Q1 took so long the written stuff in 2 and 3 tended to be quite brief and included some guesses. Also have no idea how you’re supposed to get the 4 marks for a report, would take twice as long to have calculations in a separate appendix and keep switching back and forth between the two. Hoping I’ve done enough

1) a) is diversification and buying undervalued companies a valid risk diversification strategy? – entering new markets is a good way to further diversify risk as market risk will be diversified. companies will be undervalued when management is not performing well. however in perfect markets the company will not be undervalued. companies more likely to be undervalued in imperfect markets, but this makes these investments more risky. so yes it is a valid strategy although you can diversify risk but your overall risk exposure may actually increase. Basically I waffled a lot on this and not sure how much was correct!

b) why might EU not want Nahara to buy the other co? – competition commission, cons of a monopoly, foreign govt owned so political risk as well

c) i)value of Fugae – g=br, FCFE @ ke, add synergy, time by 7.5, subtract consideration (mvE + mvD). Think I worked out the value of Fugae to be 922.5m

ii) value of luxury transport project with and without option – probabilities (pretty sure I got these right but didn’t include any workings) ,expected value discounted @ WACC (I used Avem’s WACC in error but noted this later on when I realised), black scholes option (just did Pe-Pa to show there was intrinsic value), asset beta of luxury business weighted to .15 and regeared

iii) evaluate i) and ii) – Avem should buy F, should proceed with luxury transport project as positive NPV, should take option as has intrinsic value (assuming £50m paid today)

2 a) centralised treasury – inter company hedging, greater power in the finance market (eg borrowing), can use treasury to achieve group’s targets
decentralised – motivate local staff, can react quicker to local issues, should know local regulations better (eg Islamic finance), autonomy
b) Calculate swap & option – swap seemed fairly easy, didn’t attempt the option due to time
c) Salam – spec not allowed, not allowed for cash, gold, silver etc, must be backed by existing tangible assets, no unethical trades like gambling, must be compliant with sharia law so more expensive to set up

3a) EU Free Trade Zone characteristics and goals – remove barriers to trade eg import tariffs and embargoes, all members treated equally rule to reduce political conflicts impacting trade, competition is better for customers and shareholders eg through lower prices
b) IRR, MIRR, VAR at 95% and 90% – did all calculations, D was better in 3 of them so go for D especially as MIRR is superior to IRR
c) what are the legal costs and how to mitigate – food standards agency regulations/fines, mitigate by Joint Venture, making provisions, pay legal consultants with expertise in that market