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There are a number of formulas that need to be rearranged in AFM, such as M&M’s proposition 2 (to get the cost of equity if the company was ungeared), or when estimating the required yield on a bond.
This is possible to lay out in Excel and Word but is time consuming. I find doing this on scrap paper is by far the quickest way, but I don’t think the CBE markers will see this.
Can you please advise any ways to do this.
You are correct that the markers are not able to see any workings on scrap paper.
If you end up with the correct figure then you will get the marks even though the marker cannot see the workings. However you are then taking a very big risk because if you get the wrong figure you get no marks at all for that section whereas if your workings were there you would still get marks for trying to do the right thing.
Best is to find the most efficient way of using the spreadsheet provided, or at the very least state which formula you are using.
(As far as calculating the yield on a bond, it depends what sort of question you are referring to, but appreciate that where relevant you can use the IRR function in the spreadsheet.)
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Thank you. I guess it’s practice, practice!
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