Paper P4 Dec 2010 exam was

I really wonder do i have deficit of inteligence 🙂

Exam seem very easy, but VERY tricky. So i think if you new all small trick you could do it very easly. However this tricks were not shown anywhere, and I had to use much comon sence. And when it is about ACCA, I dont like use of my own logic very much (usually it is wrong), and that why I am very scared about P4 results. However it doesnt matter.. there is a June.

Q1 – how did you caluculated returns at all? Actually for me it was problem MV of debt to caluculate (i didnt see data for that), so I decided to use book values for gearing (probably it is not correct, but I can get some marks). Parts b,c,d hmmm I wrote something … and suggest option 2 . restructuring, as by my caluculation this one had only positive P&L, and biggest value (I used NPV and given cost of capital). I put it in format of report.

Q2 It seemed straightforward APV question.. hmmm but I am woried as most od NPV values were negative because of working capital… so it could be wrong… but I have calculations.. and I wrote assumptions and comments, and advice to sell it.

Q3 … Black and Scholes, I calculated something… and commented an all 3 proposals,and used some knowledge from risk uncertantz article, like dilution, neutral risk positions etc.. however.. it doesnt have to be enough right?

Q4, I have just started, wrote DVM formulae, didnt have MV of share, so I tried via Noapat to calculate Value of company, and caluculated expected NPV for next year..

Hmm I have no Idea and feeling what I have done… just it is good feeling to have it behind me…I tried the best.

Any way the paper was made much strategic than the ussual technical one which i think the examaminer is doing good. Playing to get a pass.

It is too long to do. I even don’t believe that examiner himself can do it for 3 hours. How can candicdate do? Crazy long in the comparison with the previous examinations. DIsaster!!!!!!!!!!!!!!

It was OK. provided u really know the basics. I used geared and ungeared approach to get the beta in Q2. and i think it is totally fine. and for Q3, i have to blame myself for the stupidity. i spotted managing share price risk, i and i read on the delta hedge also. but i did not do the delta hedge instead i wrote the co. need to SELL put options! Instead of BUY, i wrote SELL. i think i will not get much marks from the 7 marks. sigh. i pray for luck and then i could pass. 🙂

I agree, I have left my feedback on acca site. Hopefully enough people do the same.

Tried my best:
Q1 – I had a stab at but it was too long to complete
Q2 – Would have been ok but the information was so splattered over the page that I needed more time to finish it.
Q3 – I think was ok.
Q5 – Was a pointless question. It had nothing to do with anything… it was just a bull and bluff question.

Nothing to do with the fact that the world is in a financial meltdown – which I find strange for a financial paper. (Bob barely touched on it too) – But that’s maybe because both he and Bob live in their own little world of academia and have zero clue as to the outside world.

Couldn’t see anything on ethics.

Let’s see how this goes.

With so many more people finding it ‘ok’, the passmark will go up.

Guys, if the exam panel marks our papers as they should, I do not believe that the pass rate would exceed …20%,
Hope that criteria will be loosen, otherwise the nightmare will continue endlessly…

I really do hope they take our comments into consideration when marking this paper since a majority seems to think that the paper was a disaster……………the scenarios were too long and took lots of time to ready through……………..also think the time is not enough to answer 4 questions, should have been 3…………………couldn’t read though the questions to be able to understand what it was about just glimpse through and wrote answers………………..think i should have done question 1 last as it took me more than half the exam time to do it and it was difficult to continue answering the other parts since they depended on calculations from the first part………………….been suffering with a terrible headache since i did this exam………….know i have to resit in June 2011 or might just choose another option.

The questions were very long, it was difficult to complete all four questions in the 3 hours given.

can someone tell me how to leave a comment about the exam on ACCA’s website please.

@lesly-ann said:
can someone tell me how to leave a comment about the exam on ACCA’s website please.

https://www.accaglobal.com/allnews/students/2010/NEWSQ4/News/3381129

@change said:
This was decimation! Its a total cointoss if I get over the line of not, heres what I got, lemme know what ye think;

Started with q2 – APV at 10%, working capital made everything negative? The PV of the interest relief, the PV of the Govt grant, the PV of the lost tax releif due to reduced interest costs, the issue costs, a present NPV overall..but only because of the subsidisation. Re decision – invest but question the exit strategy – where is the 16kk coming from? Is it valid? Is the Govt grant for sure and certain for hte whole of hte life etc? Then typical APV assumptions re M&M – tax exhaustion, bankruptacy risks, agency issues yadda. Of the 25 marks, I think I might have got 20.

Next stop, q3. Delta hedge. Liek a previous poster said – something like 348 shares. I think it was ending in 0.1 anyways so slighlt underhedge. I said No. of call options to sell (i dont think this is correct tho) and a bit about the symmetrical and offsetting payments to make the portfolio indepenedent of the underlying. Threw in that delta changed constantly also as a caveat. OF the 13 marks I tried to come up with some points, probably made three for each so maybe 3*3. Of hte 20 I prob go (5+9) = 16. Total thus far, 36 baby!

Question 4, DTR and all that jazz. Sloppy as hell TBH. Got (-) cashflows after capex, it was ((net profit + 75% of after tax profits on sub 1) less the capex) and then (net profit + 75%(after tax proifts on sub 1 after markup of 40% on sub two’s goods) + 75%(sub two’s profits with the mark up) less the cap ex again). I forget to add the additional tax on repatriation to home country on both scenarios. Of the 14 I prob only got 4, lets make it 2. Second part re discussion – I said intutively there will be less cashflow as more of the co’s profits are taxed in a higher country, this may be good for non-financial reasons re media/pr etc and it may motivate that sub2 to be more productive due to perofmrance measurement etc, i said transfer pricing and management overheads etc plus to move any group losses to thiscountry to work againts this higher tax. OF the 6 marks, i guess I got 4. That makes 6 out of 20 – not cool but the cum. is 42…baby!

Finally, to q1 , did the format report but was messy messy so maybe 1 of 4 marks, part 1 was write down the assets, pay off the employees redundancies (super-preferential treatment to the blue-collar proles!!) then I got lazy and said that the bank OD had a floating charge so nadda for the debtholders and zip for the equity holders – i prob got 2 of the 3 marks – hey, its a lazy assumption! Re restructuring, stick in the new “financed by” section, new share issues bring up the bank/cash and assumed no write down to NRV since the company contines. I also put in the additional profits (7% pa?) in perpiutuy at the new discount rate (12% minus the 2% mentioned) and added that to the assets on the ne wb/s. Of the 8 marks…I expect maybe 2. Re part three, MBO, same thing, halfed the assets, added the additional profit in perp. to it and stated my obious (simplistic) assumptions. I expect 1 mark there. The last 12, a good bit of risk/return preferences, yadda yadda re equity liek a call option, stuff liek how the directors want the co. to surive to avoid any fradulent trading investigations etc and went with MBO, not coz my (shoddy) calc.smind you but for ideas like managers would pay a bigger premium for (i) depsration to keep their jobz and (ii) winners curse bidding up, (iii) use the money to restructure the remaining sections (iv) good for the shareholders to split the co.s – greater clarity (v) use the revenues to delverage the remaining co.’s d/e – of the 12 I expect maybe 8 – that be 14 from 35 and brings my total to 56

…but who knows – have I made some msitake somewhere there? Let me know peeps.

Stay cool

Part 2(a), I discounted at 10% cost of equity too..but positive Base case NPV. and then overall, it is positive APV. Part 3(a), however, I get 420 put option contracts, with delta N(-d1) of 0.4761. 420 = 200,000 / 1,000 x 0.4761.. and the put option premium is 0.29 each…I am not sure whether it is correct or not, but my classmate get the same answer. How do you get 348 contracts tho? Question 1 , I suggested that Proposal 2 is the most likely to be suggested, after all the restructuring result. Question 4 is a disaster, run out of time.