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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%
@mustafatariq My ans came out v weird. What rate did you discount the investment side cashflows? Was it 20%
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 functionHad 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.
I did as they said discounted cashflow in 5 years time (given) so we need its present value to calculate the Npv (pv discounted at year 5), I am sure I am most definitely wrong… also we need to factor in the Wc investment a year prior.My question is how u guys did the adjustments and the resultant Npv.
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 🙂
Yes I discounted. I used the 25 year annuity factor minus the 5 year discount factor.
simon374 wrote:I got a negative NPV for investment A and a positive NPV of investment B of about $1.3m
Guys, please can somebody tell me that if the BoD comments meeting discussion was part of Report or was a separate question in 50 marker Question?
Hi Guys, Did anybody get Interest rate risk management/hedging related questions ?
No actually my rate was 14% for base case and I used risk free rate for financing CF. What did you do for working capital?
Okay okay, by mistake I included that also in the report. I hope that they do not neglect that part
My paper
Q1 50 marks
1. NPV of project a
2. Npv of project B before offer from another company
b. NPV of project B after offer from another company
3. evaluate and discuss financial assumptions and which project they should pick before BOD concerns
4. discuss and explain BOD concerns and how company should proceedQ2 25 marks
1. calculate before acq value of 2 companies (5 marks)
2. calculate and discuss value of combined company (5 marks)
3. evaluate whether company b will accept offer why company a (3 marks)
4.what factors competitions authority consider when deciding on company a’s acq (7 marks)Q3 25 Marks
1. multilateral netting and briefly discuss main advantage (9 marks)
2. MMH and Forward (4 marks)
3. explain how centralised treasury will help with companys cost cutting strategy, and the advantages of a decentralised treasury function to help with the issues the company is facing (7 marks)Pratick , in question 3 it was about how would treasury deparment would have positive impact and cost cutting to the company
In part b anyone what have you discuused about possible actions,other possible actions and recommendation?
@mustafatariq I didn’t release back the working capital in the 4th year, as it was a 10 year horizon. I just added the inflated impact.
Also did you inflated the post tax cashflows of 55m$?It was part of the report.
Mustafatariq21 wrote:Zaid it was not part of report
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.
In my too. It was 10% of revenue. I think I missed the part when they said you did not have to release it back on the fourth year.
Someone mentioned that they said it should not have been released.
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
jaiyecoker wrote:In my too. It was 10% of revenue. I think I missed the part when they said you did not have to release it back on the fourth year.
Yes the question said do not release it back
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