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

Can’t believe netting came up instead of futures/options ?

Did people get a higher npv of around $5m for investment A and inv B with the put option came to about $4m

Was the BoD meeting discussion part of the report? Or was a seperate requirement?

Was the BoD meeting discussion part of the report? Or was a seperate requirement, that is seperate C I guess probably it was part of B that is report only. Just want to confirm

Yes

Yep it was part of the report

It was payment i guess

For Swedish company was payable.

Did anyone got APV question on Dorinvic Co? What did your answer come?

Hey farah yess I got the dorinowic question. I think my APV was around 6m. I feel mine was wrong. How about yours?

My question was Q1 NPV with BSOP Q2 Mergers & Acq Q3 Multinetting and treasury function theory Guys what points did you put in your report for q1 please?

Can anyone tell what they got in their result in the 50 marker…for me it was some 3 million for investment A and 5 million something for investment b with the real option incorporated.less than a million for investment b without real option.

yep

Did you add the after tax cash flows ? I got 13-16m. Can’t remember the exact figures. However it’s not the final answer that matters, it’s the steps.

abin111 wrote:Can anyone tell what they got in their result in the 50 marker…for me it was some 3 million for investment A and 5 million something for investment b with the real option incorporated.less than a million for investment b without real option.

I know right????

I got around that but I added the annuity factor for the years 5-25 so it was much higher but don't know if it's right!

Same here, it was much higher than 4-5m. All the calculations were positive, but investment b with real options was higher.

ale.crr wrote:I got around that but I added the annuity factor for the years 5-25 so it was much higher but don’t know if it’s right!

I talked about risk appetite and attitude which seemed to be the main focus looking at past paper answers, I included the limitations of BSOP (which are standard in the technical article) and I put big emphasis on the capital structure which might be unlikely that stays unchanged considering the systematic and unsystematic risk with the new investment especially if we consider the full 25 years. In the report I said the board should ensure there is enough demand, that the jet fuel is safe and then maybe there may be government incentives for environmentally friendly products, also I suggested to delay the replacement of the production facility to retain more liquidity for the investment.

My answer came 0.3 million for A and 0.6 for B with real option, don’t know if that’s right? Also that’s correct right? Including BoD Discussion in report? There was no part C in Question -1

My answer is around 5m for project A, project B without real option NPV is almost 0. With real option I do not know how to calculate so just leave =(. Dont know if I can pass=( Just hope for the best

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 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.

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 ?

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

what was asked in mergers and acquisition ?