Paper F9 Dec 2010 exam was

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@aliboy9 said:
please tell me should i have used the 80% 20% for gearing or the MV of target company… :((
i took MV for beta fearing and regearing 🙁

you must first change it to beta asset before you factor the MV of the company investing in the new company

Note un-gear the beta equity of the similar company first before you find the equity beta with the current market value of the company investing in the new company

Very straightforward – but time management very important.

Degear using comparative company debt and equity market values – with comp company Beta to get business related Beta or asset beta.

Regear using market value of expanding company equity and debt.

39 impossible, it was 4% – 4.23% like that

WACC was 11%

NPV was negative

EOQ was better

Q2 i made a big blinder 🙁 i know ratio very well, but i wrote some thing else 🙁 i wrote the method of raising 200 million 🙁

@lordoflords7 said:
Does any one remember what the Kd was? I got someting high like 39% but thought it was a bit exxagerated…

true, thats why i missed my most fav question of ratios 🙁

@stu4269 said:
Paper seemed quite fair but the questions were, in my opinion, poorly structured. It must be very difficult if english is not your first language and you have to sit one of these. Just say what you want!!!!!!!!!!!!!!

@handsome said:
39 impossible, it was 4% – 4.23% like that

WACC was 11%

NPV was negative

EOQ was better

Q2 i made a big blinder 🙁 i know ratio very well, but i wrote some thing else 🙁 i wrote the method of raising 200 million 🙁

my EOQ was better by about 20 grand. Too much??

louibee,,,,i wrote for my answer to working cap on receivables question,managing accounts receivable, debt collection admin costs, controlling credit to individual customers, extra cap required, additional finance required for increase in volume of accs receivable…… but maybe i read the question wrong..

My WC receivables answer – had 3 main parts.

External – may be limited by sector and terms of trade offered by others. Mentioned potential loss of revenues from being more strict than competition.
Internal – management of accounts receivable and credit giving process
Financing – cost of funding, discounting for early payment, use of factors and use of invoice discounting if available.

i think the paper ws quite easy and passable..i got an npv of (721000)..hope thats correct or evn near to that..and there was no need calculate a roce and payback as that wasnt asked for in part a or (b).those who did that simply wasted their time.directors views were to be discussed in part (:) of the Qs.
also i took a balancing allowance in the last yr and no recovery of Wc as the Qs demanded that.
i got a WACC in the last qs of 11.6%…hope i pass

@cuid3 said:
i think the paper ws quite easy and passable..i got an npv of (721000)..hope thats correct or evn near to that..and there was no need calculate a roce and payback as that wasnt asked for in part a or (b).those who did that simply wasted their time.directors views were to be discussed in part (:) of the Qs.
also i took a balancing allowance in the last yr and no recovery of Wc as the Qs demanded that.
i got a WACC in the last qs of 11.6%…hope i pass

As a matter of interest, what discount factor did everyone use for the NPV. I started with 20% as per director, but switched to 10%. Came out with Negative npv of around 400 grand. But it was neg of about 700 with the 20% factor so just interested

Q1) NPV negative so reject
Directors comments – wrote about project period being 4 years on all, payback and roce not included tax and cap all.
Beta Asset – get BA from othe companies debt to equity and then re-gear using investing company.

Q2) Raising 200 million did growth on profit etc and explained gearing already high so dont raise via debt as will increase gearing. Int cover also high and this debt would reduce again so risky. Rights issue bring gearing down but more expensive and harder to set-up.
Int on bonds- Lenth taken over the longer then higher int etc
Efficiency – didnt know

Q3) EOQ – Saved around £20k something like £70k with current and £50k with eoq
Receiveables – saved around $860000 and then settlement discount could afford to be upto 3%
JIT – waffled about the benifits i.e no wastage, no cash tied up stock goin out of date
Working capital policy of trade receivables – taked about the way it was funded and the cash managment and about the working capital cycle.

4) DGM and Net asset – got $7.55 per share and then $755 mill for cost
Cost of Debt only calculated for bonds not pref shares
WACC 11.6%
Dividen Policy YIKES didnt chat much about this just said to determine – look at reserves etc see how much is available (prob got 2 marks on this)

and yes eoq was better offering a saving of about 20 grnd more or less dont remmber exactly..and offering a settlement discount was also net beneficial

@bridmw said:
For NPV used the company’s cost of capital of 10% as stated in the question. Negative NPV of c.700k+.

you have to use fisher principle to inflate the 10%