Paper F9 Dec 2010 exam was

I went first for all written parts in questions… to get some extra easy points…but then… Q4 eh … there was a problem:(
see u … F7 is waiting for me

It was all abut ratios according to every one. but i has written about the methods to raise the cash 🙁

@mrash said:
Any Idea on what q2a was all about

I think it was a discussion on whether the company could/should raise the money via debt or equity. It was a discussion question that needed gearing and interest cover ratios as well as EPS and dividend information to answer it well. IMO.

@soba said:
Except Q2 rest of questions are straight forward n easy…inshallah will pass

Why was question 2 difficult?

All praise the giant spaghetti monster and praise his wonderful pastaness.

oh my god – A LOT of writing!! felt like my arm was going to break..

for Q2 – did anyone else write that they should first use their retained earnings to reduce the overdraft?? or was I talking complete rubbish..??

damn!!! yep – I think it did say that.. gutted!!!! hope I waffled enough to pick up marks elsewhere then..
thanks!! 🙂

@saadshakil said:
q1- npv was (-700+) something. cost of capital 12.* something.

q2- (a)discussion part abt takeover, (b)bond interest rate- yield curve normal and inverse, (c)effiency weak semi strong and strong.

q3- eoq 5000units, there was saving using eoq.

q4- value of company $755m. net assets around $900m used market value of pref debt, bonds and ordinary shares and added all the other equity.
cost of debt 5.47%, wacc 11% or 12%

Do you think you passed?

I actually want foreingn exchange to come, i understand it really well now, Anyways, it was an ok paper. Q 1 had me puzzled tho but i got negative npv too. I hope ah pass. Prepin for F7

You are the second one after me who said that you have written the methods of raising 200m, Where every one saying that the question related to ratio

i have written over draft, long term loan, right issue, etc

@05008967 said:
Question 1, please someone tell me if this was correct…
I worked out the inflated values of SP-SC for the first 4 years, then did the same for the VC using the other inflation rate as specified.
Took those figures as contribution per unit and multiplied by the 750000 for each year to get the income for yr 1 – 4.
Credit of 250k in yr0 for working capital, worked out what inflation on 250k was at 4.5% for each year and credited each year with the differences. Originally used the DF of 20%, but redone the entire question as also forgot tax!!
I didn’t claim the working capital back in the end, thought that is what was requested. Overall got around neg 740k NPV

part b, discussed how payback is a crude evaluation suitable for screening out projects, ignores cash flow outside payback period. ROCE better but includes non relevant cash flow and ignores timing and time value of cash flows.

Q2
Can’t remember the first part. JIT was easy.

Q3
For the raising of 200m, I suggested sale and lease back of the 300m NCA. Also tackling of the overdraft with its huge interest and on demand risk. Payables days was very short so discuss extending or making use of longer credit period.
Rights issue and offering to public but wary of dilution of control from insitutional investors.

Market efficiency, mentioned weak, semi strong and strong efficiency

Q4
Got a Kd = 3% from doing IRR
WACC = 11.4%
Ke = 12% as stated
vd: think was 52.4m
ve: around 830m

For receivables management wherever that was, discussed credit analysis, credit management and credit collection and use of debt factors.

Hope for at least 50!

I threw in roce for the current year and also the trade payables days but couldnt really put too much into it as there was no balance sheet figs for previous year for comparison. Hopefully there will be marks available for non ratio as it was still analysis and evaluation. I love ratio analysis, and would have preferred a different question 🙂

@handsome said:
You are the second one after me who said that you have written the methods of raising 200m, Where every one saying that the question related to ratio

i have written over draft, long term loan, right issue, etc

I am sure the question did ask you to discuss methods that could be undertaken to raise the money required, so i think we are ok. half marks at least! F7 next week, awful.

@handsome said:
Ratio analysis is one of my fav topic too but i did not understand the question in exam and start writing the method of raising cash 🙁

i wish there would be hedging question

@sabrina1942 said:
Guys this paper looks easy but there was some tricky questions. I know the examiners is going to mark very hard.
The neg NPV scared me and my friends too so we can waste more time on adding back our answers.
the only answer i am certain abt is the stupid 5000 units using the EOQ
I didn’t prepared for this i had to really think back.
I pray and hope for a pass desperately.

YOU KNOW HOW?- the marking is pretty standard for f9 judging by the schemes for the past papers. Most of the theory questions were quite straightforward although they required firm knowledge of the topics to which they referred. The NPV had one slight twist in that the tax benefit was delayed one year but nothing that hasn’t been seen before, negative NPVs are actually more common than positive when evaluating projects. The only reason you’re seeing tricky questions is because you were not prepared.

any body tell me the my calculation are correct i hope so but calculating npv not correct tellme what happen plzzz