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In question one my NPV was around Negative 125 million. I dont understand how can people get positive npv. Knowing that large investment amount with lower exc rate and no effect of discount factor because of year 0. First year was a loss. And only the two big inflow chunks were in year 3 and year 4 , exc rates were high in year 3 and 4 moreover discount factor also applied so how can it goes positive? I dont know. May be you guys didnt convert it to $ and taken out npv first.
Moreoever number of contracts i calculated were 124. I m not really sure but i read that twice the borrowing period was 11 months.
I had only 15 minutes left . And i had to do q2 part b worth 20 marks and Q4(b) which worth 10 marks. I decided to do part b q2 as it carries more marks. I read the question and menawhile i had 8 mins left and in 8 minutes i just calculated dividend yield decline in growth and intrest cover. I was actually writing that and time was over , dint even recommend whther to dispose off equirt stake or not!
Hoping to pass inshaAllah
I don’t think you missed anything. there was really no currency given for the redundancy cost and contribution.
I got 68 contracts. The company was going to borrow in 5 months and repay in 11. Therefore the length of loan was 6 months
34 * 0.5 = 17
1 * 0.25 =.2517/.25 = 68
Made many silly mistakes in 1 just cut my losses after redundancy and did the report. Did 8/9 issues risks.
Managed 4 a and a tiny bit of 4b was too confusing. Scribbled a few lines down for Q2. Just compared co to market and benefits of having equity/not having equity.
September sitting looking very likly. Disappointed as I was well prepared going in but time pressure got me.
I think it was reasonable to get positive NPV in Q1 as the initial outlay was not big in comparison with the cash flows in the following years.
@lunix said:
I think it was reasonable to get positive NPV in Q1 as the initial outlay was not big in comparison with the cash flows in the following years.Inflows were indeed good but in last 2 years where tax has taken 40 percent of the profits. But 21000 + 18000 and i think 3000 millions rand investment was a huge amount. Cashflows were not that of large amount.
heyy guys, hv been reading ur comments.
i agree the questions were loaded. my first time of writing this paper. was caught up with ques 1. was confused abt the conversions because of the 3 currencies.the issue abt the components been exported direct into Europe threw me off. my mistake was nt converting the selling price of €700 into yilandwe. was able to inflate the figures well though but was nt abt to use them in the computation.
took too much time to analyse whether the final computation should be in yilandwe or euros befor converting to dollars.
was able to set up the report well though.
for the options, i did que 2 & 3.
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@muneebnawaz90 said:
Inflows were indeed good but in last 2 years where tax has taken 40 percent of the profits. But 21000 + 18000 and i think 3000 millions rand investment was a huge amount. Cashflows were not that of large amount.Did you convert the component sales price from Euro?
That conversion really increased the revenue figures for the cash flows.
@angleo86 said:
Did you convert the component sales price from Euro?That conversion really increased the revenue figures for the cash flows.
Yes i did
700 x inflation rate x 150000 units x exc rate- Topics: 0
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@muneebnawaz90 said:
Yes i did
700 x inflation rate x 150000 units x exc rateWell I’m not sure then. My revenue figures were fairly large.
The more I think about this exam the more depressed I get!
Q1 was really time consuming….i left it incomplete to attempt d other options. There was no currency value provided for d redundancy cost so i left it out. Provided som assumptions but i’m nt sure they r enough given d no. of marks allocated to da part.
D optional questions i chose were q3 and q4. I really didnt knw wa q2 was askin for and given d amt of figures it probably wud hv req’d more calculations which i didnt hv time for.
More time was needed to do an entire paper. Sigh.
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The question says inflation started in year 3?? All I remember is that inflation started first year onwards! omg.
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Hi,
Q1 – I got a positive NPV $72m, before US taxes. I did considered that in the first two years Co does not pay any taxes to Yilandwe Government.Also, I did a comparison with the PV of the CFs in case of licensing the plant (was about $68m, this does not include an estimated growth with 80%) – also before US taxes.
My assumptions and risk discussion was based mostly on this comparison.
This was my view..
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@muneebnawaz90 said:
Yes i did
700 x inflation rate x 150000 units x exc rateI got positive results starting with y1.
Why to record losses in y1 since the fixed cost was not that high?
Finally + NPV seems resonable.@esoluyemo said:
Third attempt on P4. I will change to P5. This course is time pressured and the volume of calculations involved is killing. I regret doing P4 in the first instancei just want to say, don’t give up, if it is humanly possible, it is in your realm of possibility
Why why why….. Can a human being with one head; one brain and 2 hands complete this on time???? First attempt but if I do Fail will switch to P7 or something else…. OMG how can u understand that I ended up with positive NPV of 194 million usd abolutely ridiculous… A total mess
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Q1 was time consuming but it was manageable, I completed the whole question in 1hr 40 mins, took me 10 mins extra as I wanted to make sure I havent left anything out in the calculation, theRe were quite a number of things going on in the question but I kept myself calm and kept on focusing on each and every variable I was working on, as per my calculation I computed the following: 1. Sales, 2. Local variable cost, 3. Foreign component cost(@ $280), 4. Fixed Cost, 5. Royalty fee (inflated by 80%), 6. Tax allowable capital allowance on machinery (which was 4500 million per anum), then I computed the following and I got a loss in the 1st year which I carried forward to the third year as stated in the question that all the losses can be carried forward after 2 years, 7. Computed the tax on 1-6 stated above, 8. Added back the capital allowance as it is a non cash expense, 9. Computed the working capital changes, 10. Computed the cash flows, 11. Converted the cash flows into $ currency since I assumed the amounts to be remitted back to Imoni Co.
Then I computed the Cash flows of Imoni Co, 1. Contribution, 2. Royalty fee, 3. computed tax, 4. Deducted the lost contribution and redundancy cost, 5. Added the remittable cash flows from yilandwe’s project, discounted the figures using 12% ( as it was project specific) and got a positive NPV of $17.8 million
Attempted q3 and q4.
q3 A. and B. went good, C. ( I don’t remember even what I wrote :’D)
q4 A. went amazing (effective rates were 4.7% hedging via interest rate futures, 5.33% @95.5 ex price and 5.1% @96 ex price hedging via options on interest rate futures and 5.281 % hedging via collars. B. ( couldn’t do it as I had no idea what it was asking about and I was just left with 3 minutes).So yes overall attempted 90% of the paper. I hope to pass. Rest depends upon the examiner.
hello,
for qn no 4 how many contracts did you get, as in because I got 68 contracts.
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Yes even I got 68 contracts.
Hi If I got you well you accounted for royalties twice; and you even inflated it once while if ,my remember is good royalties were not subjected to inflation….. Also for the WDA tax effect I rather used the machinery cost only since it was stated in the question that only machinery was subjected to WDA that should give you I think 1800 tax effect deffered 3 times to the 3rd year and 1800 in the 4th year::: I think these are the only divergent points we have for the rest we agree hope you ll get it I do not wish anybodu to go through this twice a life
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I didn’t mean to inflate them, the question Said that the company wants to increase the royalty fee by 80 percent so I did and I have only applied WDA on machinery on 18000 million which computes to 4500 as the WDA on machinery was 25% straight line so 18000 x 25%= 4500
@arnoldzongo said:
Why why why….. Can a human being with one head; one brain and 2 hands complete this on time???? First attempt but if I do Fail will switch to P7 or something else…. OMG how can u understand that I ended up with positive NPV of 194 million usd abolutely ridiculous… A total messI suggest you to go for p6… as it is easy as compare to p4. 😛
@arnoldzongo said:
thank youKidding. May u pass your p4 in this attempt ameen… best wishes….
The lost contribution is in $ it discounted at the US DCF. it reduces the NPV of the project.
ok I get you now; you went on the assumpion that governement will accept the 80percent increase; wich I refused due to the fact that the have tight ,onetary restriction in that country but I accepted that the transfer price will actually increase to generate 80 dollars contribution as tis is raisonable…. I think that if in your asumption you stated that it willl go through marking this is not big deal….. Then for the WDA we are in agrement since the tax effect of 4500 WDA will be 4500 times 40percent which give 1800 net tax effect and since this can be carried forward in year 3 you will have a net tax effect of 1800times 3 i.e year 1,2,3 and in fourt year only 1800:::: we are then on the same lenght of things just that I totaly forgot to remove royalties from yilamde NPV inYR currency i just added the 20million USD in Imino Co NPV you are right about it…. If I Fail will not sit this again:::: Hope P5 will be better tomorrow but looking at the pass rate P4 is much more better/…. Loool
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