*** September 2022 ACCA AFM exam – Instant Poll and comments ***

I got a negative NPV for investment A and a positive NPV of investment B of about $1.3m

Hope you discounted the annuity to year 4? The annuity of 7.843 given is for 25 years at 12%

My question paper was somewhat like this :

1. 50 marker ( NPV + APV )

( a ) 5 mks to discuss statements made by the Chairman & CEO apropos to gearing policy.
( b )19 marks for APV calculation ( incl 4 for discussion ). There was an equal installment bank loan. Pre-Tax CF was directly given for Phase 1 of the project. And post-tax ones for Phase 2 of the project.
5 mks for assumptions
5 mks for why APV is superior to NPV and the limitations of the method
( c ) 6 mks for factors that would encourage the company to start some non-polluting scooters quickly.

Overall a slightly below-average question. A typical one, so something of that kind was expected.

The ( c ) part was very tough in my option, and despite reading multiple times, I couldn’t even make 2 proper points.

2. 25 marker – Valuation

( a ) 9 mks for FCF & NA method calculation
( b ) 11 mks for discussion as to which is most attractive of the three plans and other things directors should be informed or think about before making the final decision.

Probably the hardest question in the paper set, the ( b ) part.

3. Hedging

( a ) 13 mks for forex heading – FRA, Options, Futures ( incl 4 for discussions )
( b ) 7 mks for the benefits of a separate treasury function

Had trouble dealing with the ( b ) part, probably only the second time it has ever come, adv & disadv of cent treasury is a popular one.

The only surprise was not to see the A&M question or reconstruction question. Unsurprisingly, the theory was very difficult and despite spending a long it was hard to make even half the points.

Overall, a less-than-good paper. Time management was slightly better than expected. And overall difficulty level was maybe as expected too.

Yes i did ,including the discounted cashflow given in 5 years time which i discounted back to present value.Even investment B gives a small Npv without the real option.Anyways rest assured whatever i did is most probably not right.I hope all u guys ace it 🙂

Guys, please can somebody tell me that if the BoD comments meeting discussion was part of Report or was a separate question in 50 marker Question?

Hey, can you share what questions you got in details please?

No actually my rate was 14% for base case and I used risk free rate for financing CF. What did you do for working capital?

Okay okay, by mistake I included that also in the report. I hope that they do not neglect that part

Pratick , in question 3 it was about how would treasury deparment would have positive impact and cost cutting to the company

@mustafatariq I didn’t release back the working capital in the 4th year, as it was a 10 year horizon. I just added the inflated impact.
Also did you inflated the post tax cashflows of 55m$?

Was working capital meant to be inflated? In my variant it was requested to include the working capital for a percentage of revenue.

farahhh wrote:@mustafatariq I didn’t release back the working capital in the 4th year, as it was a 10 year horizon. I just added the inflated impact.
Also did you inflated the post tax cashflows of 55m$?

Guys, I just wanted to confirm that for the money hedge question the investing rate was 2.1%. I was just thinking about it now and I think I might have picked the wrong rate.

I remember seeing 2.1%. Since it was a payment , you deposit first and then borrow. the 2 rates used were 2.1% and 2.2% if i remember correctly

The APV question in AFM paper is much similar to Amberle Co. question in Kaplan Kit.