Paper P4 Dec 2010 exam was

@pixie28 said:
what was the kd of the proxies debt?

I used average tax adjusted rate, now I think it should have been simple average

@pawlov said:
I feel deeply dissatisfied and a bit tricked after the exam.

Wasn’t it Mr. Malde that said that the questions would not be that concentrated on the technical side and more on the analytical one? And yet, in Q2 I felt as if somebody had been testing my “technical” skills of quick use of calculator 🙁 Definitely too few points for a question that involved so much manual (yet fairly easy, I must admit) work.

Q1 – come on. I hope to get 4 points for report structure 🙂

Q3 – didn’t get (a) part. How many put options? 200,000/1000 = 200??? Definitely not the answer for 7 marks, what was I supposed to do there? Any comments???

The comment parts, namely Q3b and Q5 were quite ok and understandable… But I really do not expect much. Let’s hope P5 tomorrow goes better.

On Q3 was a delta hedge, so you work out D1 using Black Scholes and substitute into D(-1) and go to your tables to the figure. Then devide your 200 contracts by the delta to get the amount of contracts. Something like 348

just a disaster… what the examiner want to show.. that he is genious.. by making such a radish paper…

I thought it was absolutely awful! I failed P4 in June 2010 and I think that was a walk in the park compared to this. I know I have definitely failed!

There was far too much reading! From memory, I think there was the same amount of reading as P2, but that was a 50 mark question!

I’ve decided that I am definitely not going to re-take this paper, I shall just choose another option. So frustrating as this is the only paper left for me to pass and then I am qualified.

Q.2,Discount rate was 10% by MM with tax model i.e Keu

Q.1 a) easy marks just calculate receipts less payments there was no secured debt holders so the payment was going to unsecured debtors mostly.

Q.1b) required Free cash flow to firm

Q.1c) very confusing did lots of blunders 🙁

Q.1d) was depending on part c so it was so so

Q.2b) assumptions and suggestion ………. there were lots of assumptions like on subsidized loan risk free rate is used to find annuity factor since there is no B debt etc etc

Q.3a) Black Scholes find Call option than put call parity find put option price
then put option price was multiplied with no. of shares/ contract size of 100 .

Q.3b) basic knowledge

Q.4a)Lots of calculations again like before implementing T.E proposal group tax was calcuted then 75% was applied on after tax profit dividend capacity was found almost same calculation after implementing T.E proposal.

Q.4b) required some ethical and regulatory considerations of Transfer pricing…..

So overall was a gud technical paper but very lengthy not a 3hrs exam.
It was my first attempt and hopefully the last one 🙂

Oh my gosh, a horrible exam for me.

Q1 – maybe 10 marks, Q2 hopefully 17/25, Q5 10 marks and didn’t even do the fourth question, simply ran out of time. Seems like a June resit for me, it’s not possible to pass with 3 questions right? And clearly with the marks I’ve counted, I don’t even have 50…

Q1 was a violation, the trick we’ve all been taught is to move on if you can’t do part of a question, but given than the last part of Q1 (c 13 marks) required analysis from the earlier parts, it was very difficult to “ignore the earlier parts of the question” and move on? That’s my opinion, what does everyone think? As a result I completely screwed up the timing, absolutely detestation. Worked hard and felt prepared, but exam performance simply does not reflect that….

Ideally, M&M was the most appropriate approach to find the cost of equity to discount cash flows for question 2 base case npv. But alternatively, you could find beta of the similar listed company using CAPM given the information provided, by making beta the subject of the equation: Ke = rf + B(rm-rf). Ungear this equity beta to find the asset beta which is then used to determine the new required return by equity holders for the project. You’ll get the same 10%.

did question 2 and found be of haizum by capm as mm cant be used as no kd was given and mv and only par given no time so one cant use irr to find kd as 17 marks didnt worth it unless assumption that kd was risk free 4.5% got be 2.04 and then degeared it to get ba used again capm to find ke as base case only includes ke got 10 discount rate q 3 was simple required to calculate delta hedge to balanced portfolio numberofshares/n(-d1) by black scholes after finding value divide by 1000 contract size got the answer 358 contracts and an easy calculation and then fcfe dividend capacity just need to include sucsidiary posttax 75 in normal fcfe calculation and second one fcfe by including blocked being remitted and got cover 1.0 he can do alot of things like parallel loans royalities to avoide it withholding tax of 10 percent was a trick q1 do not ask as time of only 30 min left after all that

this sitting was much easier than the June sitting, hopefull y I pass, Too much calculations for the time though was extremely time pressured.

The exam was a disaster. The scenarios were just unnecessarily long. I must have gone blind in the exam or something but for Q2 I just could not see the asset beta to ungear and to calculate the cost of equity for the base case NPV. I did not even get to do the Financing side effects part for the APV.

Q1 – It really was not extremely difficult but somebody need to tell this examiner that the questions are too long.

This examiner seems worse than Bob.

This is my third attempt and I am wondering now whether I should take P7 instead of P4. There is now way I can crack Q1. The information was so much that I couldn’t analysed and figured out in time. I didn’t realise that I should have used MM in Q2 instead of CAPM. That’s why I was stuck because Rf(4.5%) is less than Rm (4%) so I could not get Be to ungear. Q3 & Q5 were OK but that is not enough to pass this paper.

the apv calculation , i forget write the assumption about the issue cost assumed not tax allowable , if i do it not tax allowable is it wrong ?