*** September 2024 ACCA AFM exam – Instant Poll and comments ***

1st queation 50 marks : Future and forward calculations, discussion about dividend, basis risk etc etc (I got lost in this question.)

2nd queation NPV : It was ok but had technical issues which delayed the exam.

3rd question: Acqusition with 3 methods. Cash offer, share for share and mix offer (cash + share). I somehow did it suggested to go for share for share

In my 1st attwmpt i got 47 but that time the exam was so much easier. This time I don’t think I will get near 40 marks!! ?

I had same questions albeit my Q2 was the bus valuation with 3 diff purchase considerations and Q3 was NPV calc with using CAPM to find Ke to then find WACC and then NPV – can’t remember exactly the comments on this one – I think it was around 13 marks for the NPV calc and stating assumptions and then last part was commenting on Director A and B comments on capital rationing and 5 professional marks available.

Q2 was acquisition of co with 3 purchase considerations – cash, share for share and mix of cash and diff share for share with recommendations / board consideration with data given on co gearing levels versus the industry average.

Q1 started with what factors should the co consider in setting up central treasury department for first time, board report then for other parts which included an atypical FX hedge for receipt US co receiving cash from generic/made up country as the time had already passed and you were to comment on whether or not the management accountants assertions that the forward rate was better than the currency futures and was due to basis risk, then work out the dividend capacity of a co which has remitted divs from a subs and also comment on the dividend policy of that co with reference to board comments.

Overall fair to hard end paper and very challenging time wise – very disappointing absolutely no interest rate risk and only FX risk question was complete curveball as had never seen one that was retrospective and laid out like it was. Probably slightly harder than majority of other papers I have seen without being the very hardest.

Q2) a) 13 marks NPV where my npc was positive with 13.1m and suggested doing sensitivity analysis as slight change in the assumptions might make the project negative. Also gave 3-4 assumptions that were being used in the question.

B) 7 marks question on issues of director A and DIRECTOR B- with suggesting that to director A to use rights issue to avoid using debt so that gearing ratio does not rise significantly
And suggested director b to motivate the management with introduction of rewards related to performance of the project and also give training to management with recruiting new hires for shortage of time resource

Hi Any Lecturers……

Please advise since most of the students have felt this time AFM paper was terribly difficult will ACCA markers will be lenient in providing marks ?

Got same paper would you please discuss further

Sanna question was
A) advs and disadv on futures vs forwards
B) hedging the payment using money markets, but were given swaps to identify the rates, futures and options. I messed up with options and noticed when there was 5mins left, went to correct but made it worse, report didn’t match my calcs…
C) Comment on results (can’t remember nunber of marks)
D) agency issues of local treasury and head office and how to mitigate. Thought this was a odd one so I kept it more generic so doubt i’ll score much

With options you didn’t need to convert the outcome at the end, just needed to do contract size x no of contracts and then add premium…oh well.

I remember with swaps maybe I got a good rate for borrowing, but then deposit rate wasn’t beneficial so I said not to enter into a swap for deposit (or vice versa can’t remember). But I had never done a question like that before so mot even sure if you’re allowed to swap for one and not the other…

My second question was on calculating value of equity using dividend model and FCF, no PBIT was given with FCF and when I calculated it, it was much lower then dividend model…surely they should have been similair??

I couldn’t answer IPO and reverse takeover as didn’t learn :(.

Third question was a simple NPV but then there was something about capital investment system…can’t really remember know but something I hadn’t come across before.

This was my last exam, would have been nice to think I did enough for a pass rather then feeling crap

I think I got the same exam as you…
Question 1 Risk Management: Sannas Co was OK overall, it was just the mix of interest rate swaps and MMH that was hard for me. In the hedging, i got lowest payment with futures.

Question 2 was Mergers and Acquisitions: Zulla Co and it had IPO and reverse takeover and they told us to find gain with the dividend valuation method as well as free cashflow from equity. It seemed really tricky.

Question 3 was NPV: Kogkhan Co: and they had given an option. They asked us to calculate NPV before the option and after the option. Then there was a discussion question about the capital investment management system which i wasn’t too sure about but the calculations were simple enough.