Hi Everybody,

How was your exam?
Mine went well. Q4 was very easy and it was piece of cake, no complications at all and also EOQ question was very easy.But it was very time pressured for me and just because of time I was unable to attempt properly of Q3 b) and didn`t representated well. Overall it was easy paper.

Regards,
Ayesha Jabeen.

Hi there,,

I was supposed to give this paper today but unfortunately i planned at the last moment to drop this paper..

So kindly tell me about the paper, in brief that from which parts of the syllabus the questions came.

Thanks,


ALI

Although my IRR in question four was very high so I'm sure I got it wrong!! My method was right though so it was just some wrong calculation somehwere and I assume I will get most of the marks. The rest of the questions were fine.

These are the subjects that came up:

Cost of Capital and discussion on CAPM versus dividend growth model
Economic order quantity and decision about taking a discount
Working capital management
Rights issues of shares and business valuation
Invesment decision

Hope that helps

yes i thought the paper was ok. but after a while the more i thought the more i feel i'm going to fail. i just got this feeling that all my answer are not good enough. there was a question asking to calculate the size of overdraft and blah blah. that one i can't do it. anyway my IRR is around 14.2% and my npv was a positive fifty over thousand.

dunno how come the more i thought the more i feel I'm going to fail... I'll never get a piece of mind until result in right b 4 my eyes.

anyway so guy... one question was Cost of Capital and discussion on CAPM versus dividend growth model . it ask which method do we recommend to estimate Ke... dvm or capm... what are ur answers? i chose capm becos it take risk into consideration and dvm only know dividend and nothing else.

i was screwed at Q1 and 4

Mine IRR was 15.9% and ya CAPM is preferred to DVM because it takes into account risk.
Just want to confirm that what you people did with convertible debt, I think the redemption value was $117 and interest rate is payable till year 6 or year 8? I think till year6 is reasonable as we have redeemed in year 6 so no interest for year 7 n 8.

Do let me know.
Thanks,
Ayesha.

I instead of calculating the IRR calculated the Interest ( 1 - TAX ) / MV ! .

I got all confused

I think that both CAPM and DVM have advantages and disadvantages so it depends on the company which one to choose..
The conversion was in year 6 and redemption - in year 8 . I think we had to assume what the investors have done - convert or redeem the convertible loan notes..
I had a negative value for NPV in question 4. Probably I've done something wrong with the net assets..

Hello

Just wondering if any one add back the additional cashflow as at the end of the project?

I find the question so easy to compare with all the previous one, but I did not manage handle it well and don't think i pull through this one... :(

Haha

Hi haha

I added that back to the end of the year cashflows!

but i forgot to inflate the sales and variable cost by inflation rates!!! :(

How many marks would be cut for that?

hey haha ,

This is Acid !

Acid = Assadpervaiz

Acid,you will lose 10 marks for that hahhaha :D

Thank you Mah Jabeen

I might win Acid 10 marks on this but will loose on other thing.

I've never performed that bad in my life!!! and i think the examiner make our life very easy by split all question into small pieces so at least you can dig some mark out.

All his previous was nightmare therefore i expect more comprehensive question.

How's you doing?

Acid, how about you?

Haha

Hey Haha,

Yeah you win MY 10 marks!!!!! ggrrr... I did such a silly mistake I cant imagine... this points out towards poor revision!

Now I am preparing for F7 with high gear! Wat about u ? U giving F7??

yeah i use year 6 conversion value. value of convertible debt = HIGHER of conversion or redeemption. so conversion is higher therefore i just take the conversion rate which is 6 years n ignore the year 8 interest. yes i add back the wrk cap cash flow at the end of year 4. i once read on a "financial mgmt" book in library and it said that capm is the best. althought it has disadvantages ,it's the best we have now. but it also say that a better model call arbitrage pricing model is going to replace it. never heard of it.

Hello,

does anybody remember if it was general inflation given in Q4. I remember the specific inflations for sales and variable costs but I don't remeber if there was given a general inflation as well.

Thank you!!!

hi
i found paper tough
.lots of catching points
as far as i remember there was no general in flation
so cost of capital was 12%.... that's wat i used
alisha

Ok thank you! I used 12% as well as cost of capital!

mmm.. if i'm not wrong the question already said the wacc was a " money rate " wacc . which already include inflation. therefore not need to use fisher. just use the given wacc.

geyser pls elobrate more... mean we didnt had to increase sales and variable cost by inflation rates???

Of course we had to increase the selling price and variable cost figures because they were all in current price terms. However the cost of capital was already in money terms so it needed no further adjustment..so don't worry..

[quote:f6f25601d1="mkmk"]
Of course we had to increase the selling price and variable cost figures because they were all in current price terms. However the cost of capital was already in money terms so it needed no further adjustment..so don't worry..