Paper F9 Dec 2010 exam was

hope I will get at least 50.I was confused with sale demands in Q1,Q2 wasn’t easy.

Agree with bridmw… 10% cost of capital to be usedd…my pv of cashflows was 2779 less initial investment 3500

@boscobosco said:
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

I started using 9% that I had calculated using the 2 inflation rates….then I realised they told us it was 10% in the question!

I ended up with a negative NPV of 2.7m or something ridiculous. I must have majorly messed up on one part of it but the majority of it seemed right so I wont worry too much

no fisher affect the stated cost of capital was already in nominal terms

@bridmw said:
Can anyone remember how much the discounting of receivables calculation was worth? I think I may have lost a couple of points here.

It was worth 6 marks and there was a little bit extra to caculate the highest discount rate it could use (sensitivity)

@cuid3 said:
no fisher affect the stated cost of capital was already in nominal terms

when we say something is at nominal term = real terms and the computation added inflation … there was a general inflation with must be factored in the computation…. if i may ask , which question are you referring … i am referring to q1

i have used 10% as discount rate for NPV, am i OK na? i got negative NPV

did anyone write the answer to efficiency, ……..weakform, semi strong form and strong form efficiency pls reply!

@miniclaire said:
did anyone write the answer to efficiency, ……..weakform, semi strong form and strong form efficiency pls reply!

yep, thats it

@louibee said:
What did anyone do when it asked for the cost of debt? Did you jusy do the bonds or pref shares aswell???

this is what i did

what als remember was the cost of debt
Market value cost
Long term bond 7% 103.5/100*20 =20.7 4.6% * 20*7/54.2 = 1.76

Perference share @ 8% 62/50 …..= 33.5 6% * 33.5/54.2 = 3.71

Kd = 1.76+ 3.71 =5.47

hope i was right 😀

Q1) I got negative of around $700000 too, part b i talked about the disadvantages and advantages of payback period and ROCE. and part C i got aroung 12% cost of capital.

Q2) messed up, didnt know what to write so talked about equity finance and debt finacne and various calcs. part b i just guessed about lenght time off bond, amount of bond ect, part c i talked about Weak, semi strong and strong form? – not sure if correct?

Q3) i got aroung 20000 saving too which was a EOQ of 5000 instead 16000,
Discount i got something like $500000 better off to take discount as…

Current Rec 1.8m * 5.5% was 990000

With discount i worked it out as 25% of total sales something like 21.8m * 0.01 which was 218000 cost of discount less the benefit of 700000 or so being the 500000 better off as the overdraft int of 990000 remained payable even with discount?

and got around 3% as max disocunt.

part c i talked about Creditworthiness, credit limits, checks, reviews ect but think this is wrong?

Q4. part a i got around $700 million value, but with the net asset i got $94 mill?
Concerned why it was so big diff?

Part b- i got cost of Loan at arounf 4% using IRR, and aroung 11% for the pref as i did the 8%(Value per q)/MV (think about 67?),

Part C – I got around 11% total i think, got a total MV of aroung 880million?

Part d – didnt have a clue

confused and doing mitake and mitake cutting and overriting because first time f9 my be very pressure on me

For cost of debt I just found the discount factor so that the PV of the bond cash flows was equal to the MV of the debt. BUT I included the pref shares in the WACC valued like a perpetual bond ((50 x 0.08)/67) was their current cost.

EMH – 3 forms
Weak – only historic information included in current share prices. Means investor cannot get abnormal profit over the long term from studying past price movements. Empirical evidence show this is true in developed stock markets.
Semi – strong – historic information and all publicly available info included in current share values. No bargains. Implications for analysis and takeovers. Developed markets approach this state according to research.
Strong – all info public and private. Doesn’t hold abnormal profit can be made with insider information hence criminal to trade on this in many jurisdictions.