Serial number Question name Question number and Year

1 Vogel June 2014 Q3

2 Makonis December 2013 Q3
3 Proteus December 2011 Q4
4 Staple June 2016 Q3
5 Eview December 2017 Q2
6 Hathway company March 2020 Q3
7 Burung June 2014 Q2
8 Lamri December 2010 Q4
9 Cadnam December 2019 Q2
10 Prysor June 2022 Q1
11 Westparley March 2020 Q1
12 Blackbosca June 2023 Q3
13 Oxwick June 2023 Q2
14 Newimber June 2019 Q3
15 Kerrin and Danton December 2019 Q2
16 Nubo December 2013 Q4
17 Sigra December 2012 Q3
18 Louieed and Tidded June 2016 Q2
19 Tippletine June 2018 Q2
20 Amberle December 2018 Q3
21 Arthuro June 2018 Q3
22 Chithrust December 2016 Q3
23 Fernhurst December 2016 Q2
24 Armstrong December 2015 Q2
25 Pault co December 2016 Q4
26 CMC co June 2014 Q1
27 Daikon June 2015 Q4
28 Nutourne December 2018 Q2
29 Adverane June 2018 Q4
30 Digunder
31 Colvin December 2020 Q2
32 Zhichi December 2021 Q1
33 Wardegul December 2017 Q4
34 Levante co December 2011 Q3
35 Joshua June 2023 Q1
36 Fitzharis December 2020 Q3
37 Arbore co December 2012 Q4
38 Parafuel September 2022 Q1
39 Lough company September 2022 Q2
40 Gogarth June 2021 Q3
41 Garnod co June 2024 Q3
42 Littlebredy co June 2024 Q2
 43 Mahoney company June 2024 Q1
44 Mckeever co. December 2023 Q1
45 Abertafol co. December 2023 Q3
46 Npp limited June 2024 webinar handout
47 Sun Limited June 2024 webinar handout
48 Talam co. June 2019 Q1
49 Fondir co. December 2022 Q1
50 Keshi co. December 2014 Q2
51 Kenduri co. June 2013 Q3
52 Tisa Co. June 2012 Q4
53 GNT Co. June 2011 Q3
Links to useful content (these folders are updated once every 3 months - recent attempt f
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March 2023 live class spreadsheet files

Non-frequently tested areas

BSOP calculator Refer serial # 43
Currency swap Refer serial # 44
Dark pool trading system Refer December 2024 webinar d
Green finance Read my handout twice or thrice
SPACS Read my handout twice or thrice
Dutch auction Handout + video on vifhe youtub
Islamic finance Learn my handout.
Variables associated with BSOP Read my handout twice or thrice for gamma
Tick size and Tick value Refer December 2024 webinar d
M and M proposition in spreadsheet
Refer December 2024 webinar d
Interest rate swap and collar Refer June 2024 official mock Q
loan notes with annual paymentsRefer December 2024 webinar d

Contact numbers
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18 corporate restructuring
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25 investment appraisal
25 Adjusted present value
20 Dividend capacity
25 Dividend capacity
50 International investment appraisal
50 Mergers and acquisitions
25 International investment appraisal
25 mergers and acquisitions
25 corporate restructuring
25 mergers and acquisitions
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20 mergers and acquisitions
25 mergers and acquisitions
25 Adjusted present value
25 Adjusted present value
25 Dividend capacity
25 Dividend capacity
25 International investment appraisal
25 Foreign currency hedging
25 Spot yield curve and bond valuation
50 Foreign currency hedging
25 Interest rate hedging
25 Foreign currency hedging
25 Foreign currency hedging
20 BSOP model
25 International investment appraisal
50 Adjusted present value
25 Interest rate hedging
18 Bond valuation
50 Mergers and acquisitions
25 Interest rate swap
20 Capital rationing
50 Mergers and acquisitions
25 Foreign currency hedging including money market hedge
25 Foreign currency hedging
25 Mergers and acquisitions
25 investment appraisal + BSOP calculator
 50 Hedging + Currency swap
50 International investment appraisal
25 Interest rate hedging
22 share for share ratio and demerger
23 share for share ratio and demerger
50 Investment appraisal + BSOP
50 Interest rate hedging
25 Interest rate hedging with swap
25 Foreign currency hedging
20 IRR, MIRR, Value at risk
17 Bond valuation & Macaulay duration
s - recent attempt fresh handouts are shared on enrolled students whatsapp till session end)
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ACCA AFM | Day 1 | M and M proposition application in spreadsheet | Tick Size and Tick Value
or thrice
or thrice
DUOLINGO May Youtube Ads 16x9 Video 4 V7

or thrice for gamma rho etc, no need to do more than that

ACCA AFM | Day 1 | M and M proposition application in spreadsheet | Tick Size and Tick Value
ACCA AFM | Day 1 | M and M proposition application in spreadsheet | Tick Size and Tick Value
(1) ACCA AFM | Day 2 | Interest Rate Swaps & Collars | Dec'24 - YouTube
ACCA AFM | Day 1 | M and M proposition application in spreadsheet | Tick Size and Tick Value

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 Recent game changer and grand revisions (m23,j23,s23,d23,j24,s24) (September 2024 we
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ck Size and Tick Value |Dec'24

ck Size and Tick Value |Dec'24

ck Size and Tick Value |Dec'24

ck Size and Tick Value |Dec'24

VOGEL CO. - Merger & Acquisition

MAXIMUM PREMIUM VOGEL CO. COULD PAY TO ACQUIRE

Department C - sold off

Non-current Assets 19.64

Current Assets 8.37
Closing Costs -3.00
Funds raised from disposal 25.01
Payments to settle Tori Co.'s NCL and CL -20.20
Residual funds for Vogel Co. 4.81

Department B - Ndege Co.

Y0
PBDIT 13.46
Less: Tax Allowable Depreciation -3.93
PBT 9.54
Less: Tax -1.91
7.63
Add: Tax Allowable Depreciation 3.93
Less: Necessary CAPEX -3.93
Free Cash Flows 7.63

PV of FCF from Year 1 onwards@10%

PV of FCF of Year 1 8.32
PV of FCF from Year 2 onwards 182.40
Value of firm (Debt+Equity) 190.72
Less: Value of debt -40.00
Value of Equity 150.72

Department A + Vogel

Vogel Co.'s No. of shares 380

Vogel Co.'s Value per share 3
Vogel Co's Total Value 1140
Vogel Co's Current PAT 126.56
Vogel Co's Pre-acquisition P/E Ratio 9
Tori Co.'s P/E Ratio 11.26
Vogel Co's Post-acquisition P/E Ratio 10.36

Profit After Tax of Vogel Co. Post acquisition 142.76

Post-acquisition Value of Vogel Co. 1478.81

Maximum Premium that Vogel Co. should pay to acquire Tori Co.

Total Value of Vogel Post Acquisition 1634.34

Total Value of Vogel Pre Acquisition 1140
Total Value of Tori Pre Acquisition 207.174463

Maximum consideration to be paid 494.34

Less: current value of Tori -207.17
Maximum Premium to be paid 287.17
Y1

9.15
WACC
Cost of debt 4.55%
Debt 40
Equity 60
Tax rate 20%
Risk free rate of return 2%
Risk premium 7%
MV - Makonis 1218
MV - Nuvola 480
Asset beta of Makonis 0.90
Asset beta of Nuvola 1.20
Combined Asset Beta 0.98
Combined Equity Beta 1.51
Cost of Equity 12.57%
WACC 9%

Free Cash Flows

Year 1
FCF(w/o synergy) 226.8
Cash Synergy 20
FCFTF 246.8
PV of FCFTF(y1-y4)
PV of FCFTF(y5 onwards)
Value of firm
Value of debt
Value of Equity

Value of Equity post acquisition - Makonis

Less: Value of Equity pre acquisition - Makonis
Less: Value of Equity pre acquisition - Nuvola
Additional equity value created

Impact if Premium is increased to 50%

Premium @ 50%
Premium @ 30%
Extra Premium to be paid / Extra Cash outflow

Number of shares in new company

Existing 210
Newly issued 100
310
Loss in value per share

Extra funds required

 2 3 4
238.14 250.047 262.5494
20 20 20
258.14 270.047 282.5494
852.42
2818.468315
3670.89
1468.355191
2202.532787

n - Makonis 2202.532787
isition - Makonis -1218
isition - Nuvola -480
504.532787

ased to 50%
240
144
tra Cash outflow 96
0.31

96
Working 1 - Loan and Interest on Loan

Loan at the end of each year

Y0 Y1 Y2 Y3 Y4 Y5
65 62 59 56 53 50
Interest expense at the end of each year
Y0 Y1 Y2 Y3 Y4 Y5
5.85 5.58 5.31 5.04 4.77

Working 2 - Income statement ($m)

Y1 Y2 Y3 Y4 Y5
Op Balance 23.76 25.66 27.71 29.93 32.33
Management s -12.00 -12.96 -14.00 -15.12 -16.33
Interest Expe -5.85 -5.58 -5.31 -5.04 -4.77
PBT 5.91 7.12 8.41 9.77 11.23
Tax Amount -1.48 -1.78 -2.10 -2.44 -2.81
PAT 4.43 5.34 6.31 7.33 8.42
Dividend -1.11 -1.34 -1.58 -1.83 -2.11
Retained Earn 3.32 4.01 4.73 5.50 6.32

Working 3 - Debt:Equity Ratio ($m)

Y1 Y2 Y3 Y4 Y5
Debt 62 59 56 53 50
Equity 19.32 23.33 28.06 33.56 39.87
Debt:Equity % 320.84 252.90 199.58 157.94 125.40

Debt:Equity C 350% 250% 200% 150% 125%

Net Assets Valuation Method - Total Assets - Total Liabilities

Staple Local
Net Assets for 18 newspapers 66.6
Net Assets for 15 newspapers 55.5
Offer in hand 60
It is assumed that each part of the division is of equal size

Benefits: Immediate cash, concentrate on other parts

Drawbacks: Not disposing fully, Only 3 papers left so fixed costs will increase, insufficient to c

Staple View
Free Cash Flows to Equity Method (because there is no debt)
34.8
Valuation using FCFTE 452.4

Staple Investor 118.5

(not enough for the $150m investment)
s will increase, insufficient to cover $150 m

estment)
December 2017 Question #2

NOTE: The FCF given are FCFTF because the weighted avg cost of capital which means both d

Expected Sales Price

Y1 Y2 Y3
FCF 390 419 455

PV of FCF $1,317.50
PV of FCF from Year 5 onwards 4817.60

Valuation $6,135.10
Expected Sales Price $7,669
Profit on disposal $3,879

Statement of FP
Current Adjustments
Assets
NCA 15621 -3790 3567
CA 2347 4469 -3567
TA 17968

Equity and Liabilities

CUSC 1000
RE 7917 $3,879
TE 8917

NCL
10% LN 3200 -3200
OLN 2700
Bank Loans 985
TNCL 6885

CL 2166

TEL 17968

New current ratio 1.5

Extra CA 3567

Forecast EPS
Current forecast
PAT 1135
No. of shares 1000
EPS 1.135

Forecast after disposal

PAT 1135
Less: Profit from EV clubs -454
Add: Interest saved 256
Add: Return on CA 51
Add: Return on NCA 342
Adjusted Profit 1330
No. of shares 1000
EPS 1.330

WACC
Market Value of Equity 17325 Beta asset
Market Value of Debt 3496 Risk free rate
Cost of Equity (CAPM) 11% Market Rate o
Cost of Debt 8% Beta Equity
WACC 9.92%
of capital which means both debt and equity are included)

Y4
490

Adjusted

15398
3249
18647

1000
11796
12796

-
2700
985
3685

2166

18647
0.952
4%
10%
1.11
All figures are in $m unless otherwise stated
Year 1 2 3
Contribution 15 16.07
Fixed Cost -8.70 -8.96
TAD -2.4 -2.4
Balancing adjustment
Taxable Profit 0.00 3.90 4.70
Tax Expense 0.00 -0.78 -0.94
Add: TAD 2.4 2.4
Add: Balancing adjustment
Investment -12
Net Cash Flows -12.00 5.52 6.16
NPV $7.03

When using NPV Formula, Always add the investment amount from Y0 separa
However, in this Q, the investment is in Y1, therefore, it is included in the form
Otherwise, the formula would have been =npv(12%, Q13:T13)+P13
NPV Formula starts discounting values from Y1

ii)
PV of Y1 CF -10.7142857
PV of Y2 to Y5 CFs $17.74

In case of recession
PV of Y2 to Y5 CFs $10.64

Recession 20%
No recession 80%

Expected Cash Inflows $16.32

Expected NPV $5.61

iii)

Year 1 2 3 4 5
-12 3.43 3.43 3.43 3.43
NPV $3.26

iv)

Option 1: Sell immediately

$4.30
Option 2: Wait for approval
$4.26
 TAD
4 5 Year
17.21 18.43 1 12
-9.23 -9.51 1 to 2 2.4
-2.4 -2.4 2 to 3 2.4
-2.4 3 to 4 2.4
5.58 4.12 4 to 5 2.4
-1.12 -0.82 2.4 Balance
2.4 2.4
2.4

6.86 8.10

ount from Y0 separately

included in the formula
T13)+P13

6 7 8
3.43 3.43 3.43
June 2014 Question #2

If you have real cash flows, use real cost of capital

If you have nominal cash flows, use nominal cost of capital
But if each inflow and outflow has different inflation rates, inflate them with their respective in

Base Case Net Present Value

(Assume no debt, only equity)
(you don’t take interest cost because its included in Kd)
Year 0 1 2 3 4
Sales Revenue 24.87 42.69 61.81 36.92
Direct Project Costs -14.37 -23.75 -33.12 -19.05
TAD -8 -2 -1.5 -1.13
Gain on disposal 0.63
Taxable Profit 2.50 16.94 27.20 17.38
Tax@20% -0.50 -3.39 -5.44 -3.48
Profit After Tax 2.00 13.55 21.76 13.90
Add: TAD 8 2 1.5 1.13
Less: Gain on disposal -0.63
Investment -38
Proceeds from Disposal 4
Working Capit -4.97 -3.56 -3.82 4.98 7.38
Cash Flows -42.97 6.44 11.73 28.24 25.79
NPV using cost of equity 8.60

Financing side effects

Issue Cost -0.877

Annual subsidy benefit 0.516
PV of subsidy benefit 1.872
Annual Tax Relief 0.215
0.780

Total benefits of financing side effects 1.775

APV 10.379
with their respective inflation rates and use the nominal cost of capital

Inflation rate for sa 8%

Inflation rate for Dir 4%
Working for TAD & Gain on disposal
Plant & Machinery
Y0 16
Y1 -8
Y1-NBV 8
Y1-Y2 -2
Y2-NBV 6
Y2-Y3 -1.5
Y3-NBV 4.5
Y3-Y4 -1.13
Y4-NBV 3.38
Disposal Proceeds -4
Gain on Disposal -0.63
Working for Working Capital
Y0 4.97 Investment
Y1 3.56 Investment
Y2 3.82 Investment
Y3 -4.98 Release
Y4 -7.38 Release
Beta Asset appropriate for the project
Beta Equity for similar company 1.5
Debt of similar company 31.96
Equity of similar company 128
Tax Rate 20%
Beta Asset 1.25
Cost of Equity
Beta Asset 1.25
Risk Free Rate of Return 2%
Risk Premium 8%
Cost of Equity using CAPM 12.00%
Normal Borrowing 4%
Subsidised rate 1.50%
Subsidy benefit 2.50%
Dividend capacity: Total amount available to company to pay as dividends

Before TE Proposal
$000
Operating Profit 24000
Interest expense -2800
Profit Before Tax 21200
Tax Expense -5936
Profit After Tax 15264
Add: depreciation 3750
Less: Necessary CAPEX -3750
Less: Additional investment -3333
Less: investment in new project -4500
Less: Invesment in working capital -2000
Cash flows from domestic operations 5431
Cash flows from Magnolia 3159
Additional tax -324
Dividend Capacity 8266

After TE Proposal
$000
Cash Flows from domestic operations 5431
Cash Flows as dividends from subsidiarie 2717.82
Additional Tax -187.2
Dividend Capacity 7961

THEORY ANSWER
 SR OP
Current Year 66.67 20
Next year 80 24
Increase 13.33
s dividends
Prior to Implementation of TE Proposal
Strymon Magnolia
Sales 5700 15000
Less:Costs
Variable -3600 -8100
Fixed -2100 -1500
PBT 0 5400
Tax -1188
PAT 4212
Dividend -3159
RE 1053

After implementation of TE Proposal

Strymon Magnolia
Sales 7980 15000
Less:Costs 0
Variable -3600 -10380
Fixed -2100 -1500
PBT 2280 3120
Tax -957.6 -686.4
PAT 1322.4 2433.6
Dividend -991.8 -1825.2
RE 330.6 608.4
Dividend net off with withholding tax
892.62
Total Remittance to Lamri 2717.82
Forecast Dividend Capacity
OP 2678
Interest -820
PBT 1858
Tax -557.4
PAT 1300.6
Add: Depreciation 2430
Less: Necessary CAPEX -2430
Less: Investment in Additio -975
Dividend capacity 325.6
 20x5 20x6 Increase
OP 2600 2678 78
OP Margin 2% 2%
Sales Revenu 130000 133900 3900
Net Present Value of Prysor Co.
Years Y0 Y1 Y2
Sales Revenue 8000 10920
Other costs -3508 -4934
Cost of Component -877 -1186
TAD -3615 -2711
PBT 0 2089
Tax@20%
PAT 0 2089
Add: TAD 3615 2711
Investment -14460
Realisable Value
Cash Flows from subsidiary -14460 3615 4800

Converted Cash Flows -5561.54 1442.89 2008.10

Additional Tax -87.40

Contribution
Additional 122.50 173.58
Lost -400.00 -436.00
-277.50 -262.42
Tax Savings 83.25 78.73

Net Cash Flows -5561.54 1248.64 1737.01

NPV 960.43

Duration
Present value of cash inflows 1095.30 1336.57
Total PV of CI 6521.96
% of PVCI 16.79% 20.49%
Years 1 2
Duration 2.86 years

Sensitivity Analysis
Sales Revenue 8000 10920
Tax@20%
8000 10920

Converted cash flows 3193 4568

Tax@10% -319 -457
2874 4111
PV of Net of tax sales revenue 11867
8.09% (sensitivity analysis formula)
 (in ED'000) Working 1: Exchange Rates
Y3 Y4 Years 1
14641 16670 ED/M$1 2.505
-6230 -6685
-1559 -1742
-2033 -2701
4819 5542
-964 -1108
3855 4434
2033 2701

3400
5888 10535

(in M$000)
2582.60 4800.35
-211.36 -252.55

239.38 277.74
-470.88 -503.84
-231.50 -226.10
69.45 67.83

2209.19 4389.53

1491.14 2598.96

22.86% 39.85%
3 4

14641 16670
-2928.2 -3334
11712.8 13336

5138 6077
-642 -760
4495 5317
vity analysis formula)
hange Rates
2 3 4
2.391 2.280 2.195
SOLUTION
March 2020 Question #1

Appendix 1: Additional value generated from the sale of Matravers Tec

PBT 390
Tax -109.2
PAT 281
PE Ratio 18
MV of Matravers Tech Co 5054
PV of Future Free Cash Flo 4500
Additional Value 554

Appendix 2: Weighted Average Cost of Capital of Combined Company

Westparley
Market Value of debt 27300
Market Value of equity 34000
Equity beta 1.02
Asset beta 0.65

Matravers
Market value of debt 6500
Market value of equity 12500
Asset beta 0.75

Combined Company
Asset beta 0.67
Equity beta 1.06
Pre-tax cost of debt 9.80%
Debt:Equity Ratio 0.80
Cost of equity 12.01%
Combined cost of capita 10%

Appendix 3: Total Value that Westparley Co's shareholders will gain by

Matravers Tech Co.

Years 1 2
Sales Revenue 43260.00 44557.80
Profit before interest & tax 2595.60 2673.47
Tax -726.77 -748.57
PAT 1868.83 1924.90
Investment in assets -630 -648.9
Free Cash Flows 1238.83 1276.00
PV of Free Cash flows from Year 1-4 $4,110.42
PV of Free Cash flows from Year 5 onwa 11788.64
Total PV $15,899

Post-tax Synergies

Years 1 2 3
Free Cash Flows 700 750 780
PV of synergies $1,842.22

Amount payable to Matravers Co's shareholders 14375

Value attributable to Matravers Co's investors 20875

Value attributable to Westparleys investors $1,920.68

=(Total PV of Matravers Home Co.+ Proceeds from sale of Tech Co. + PV of Post
- Value attributable to Matraver's Investors
ale of Matravers Tech Co.

ombined Company

holders will gain by acquisition of Matravers Co.

3 4
45894.53 47271.37
2753.67 2836.28
-771.03 -794.16
1982.64 2042.12
-668.367 -688.41801
 1314.28 1353.71

Tech Co. + PV of Post-tax synergies)

March/June 2023 Questio

Net Present Value

Years
Pre-tax contribution
Less: Fixed Op Costs
Less: Royalty
Less: TAD
PBT
Tax@20%
PAT
Add: TAD
Cash Flows
Working Capital
Initial Investment
Net Cash Flows

Home Country
Cash Flows in Lira
Royalty Income
tax@15%
Net Cash Flows in Lira

NPV
h/June 2023 Question #3

Present Value

0 1 2 3 4
ax contribution 44.00 55.20 185.20 464.00
Fixed Op Costs (74.00) (93.00) (116.00) (145.00)
(2.50) (2.63) (2.76) (2.89)
(55.00) (55.00) (55.00) (55.00)
(87.50) (95.43) 11.44 261.11
0.00 0.00 0.00 (17.92)
(87.50) (95.43) 11.44 243.18
55.00 55.00 55.00 55.00
(32.50) (40.43) 66.44 298.18
ing Capital (0.88) (0.22) (2.60) (5.58) 9.28
l Investment (220.00)
Cash Flows (220.88) (32.72) (43.03) 60.87 307.46

e Country
Flows in Lira (843.76) (135.80) (194.04) 298.25 1638.77
lty Income 10.38 11.84 13.51 15.43
(1.56) (1.78) (2.03) (2.31)
Cash Flows in Lira (843.76) (126.99) (183.98) 309.73 1651.88

20.79
Exchange Rates
Years 0 1
3.82 4.15

Working #1: Tax

Years 1 2
PBT (87.50) (95.43)
Tax loss carried forward
TI
Tax Payable

Working #2: Working Capital

Years 0 1
Working Capital Required 0.88 1.10
Working Capital Invetsed/Released (0.88) (0.22)
 2 3 4
4.51 4.90 5.33

3 4
11.44 261.11
(11.44) (171.48)
0.00 89.62
0.00 17.92

2 3 4
3.70 9.28
(2.60) (5.58) 9.28
March/ June 2023 Quest

Pre-acquisition

Market Value
No. of Shares
P/E
PAT

Post Acquisition

Years
Post-tax Cash Flows
Investment in assets
Net Cash Flows

PV of CF from Y1-4
PV of CF from Y5 onwards
Value of firm (debt + equit
Value of equity

Value of Combined Compa

Value of Oxwick Co. pre-ac
Value of Ludham Co. pre-a

Ludham Co.'s shareholders

Oxwick Co.'s shareholders

%gain
ch/ June 2023 Question #2

acquisition
Oxwick Ludham
ket Value 2304 561.6
of Shares 200 80
18 10.8
128 52

t Acquisition

1 2 3 4
-tax Cash Flows 270.00 302.40 332.64 355.92
stment in assets (28.00) (25.92) (24.19) (18.63)
Cash Flows 242.00 276.48 308.45 337.30

f CF from Y1-4 870.39

f CF from Y5 onwards 3392.95
e of firm (debt + equit 4263.33
e of equity 3410.67

e of Combined Company 3410.67

e of Oxwick Co. pre-acquisition 2304.00
e of Ludham Co. pre-acquisition 561.6

ham Co.'s shareholders share 645.84

ick Co.'s shareholders Gain 460.83

20%
June 2019 Question #3

Change in WACC

Current WACC

ke 11.80%
kd 4.50%
MV of debt $220.32 Working #1: Market Va
MV of equity 585
Years
WACC 9.5% 0
1
Post de-merger WACC 2
3
ke 14% 4
kd 4.50% 5
MV of debt $220.32
MV of equity 351
equity beta 1.757
asset beta 0.73

New WACC 9.81%

Change in WACC 0.36%

WACC of Poynins Co.

Asset beta of Newimber Co. 1.10

Asset beta of Newimber Co. =Asset beta of clothing division x 60% + Asset beta
Asset beta of sportswear division 0.935
WACC 9%

Value of Poynins Co.

Years 0 1 2 3
CF 36.00 45.00 54.00 62.10
Tax@28% (10.08) (12.60) (15.12) (17.39)
Post-tax CF 25.92 32.40 38.88 44.71
Additional Investment (20.00) (22.00) (22.00)
Net Cash Flows 25.92 12.40 16.88 22.71
PV of CFs from Y1-Y3 43.11

Y4 onwards 502.2352969
Investment discounting (214.20)
Pv of CFs from Y4 onwards 288.04

Total Value of Poynins C 331.15

Total
king #1: Market Value of debt

Cash flows

11.8
11.8
11.8
11.8
221.8

$220.32

n x 60% + Asset beta of sportswer division x 40%

December 2019 Question #3

Kerrin Co. Danton Co.

Listed 8 years ago Established 10 years ago

Founders 20% Founders 60%
Annual growth 3% Annual growt 6%

Pre-acquisition

No. of shares 750 No. of shares 140

MV of shares 3960 MV of shares 1478.23
EPS 0.41 P/E Ratio 15.55
Share price 5.28 EBT 116.3
P/E Ratio 12.96 EAT 95.04
EBT 381.9
EAT 305.52

Pre-acquisition - Combined 5438.23

Combined Company

P/E Ratio 14.26

EAT 416.96
MV 5944.87

Additional Value created

Post-acquisition 5944.87
Pre-acquisition 5438.23
506.64

SFS Exchange
Kerrin Danton
Pre-acquisition 3960 1478.23
Add: Premium 63.17 443.47
4023.17 1921.70
Gain 63.17 443.47
Gain % 2% 30%

Value per share 5.36 5.36

Number of shares in the ne 750 358
SFS Exchange ratio 2.56
Danton Co. shareholders are offered 2.56 new shares for every 1 share

Total Shares in the new company 1108

Kerrin Co.'s % 68%
Danton Co. % 32%

Impact on Shareholders wealth

Kerrin Danton
Pre-acquisition 3960 1478.23
Cash Offer 1834
Value 4110.87
Gain for shareholders 150.87 355.77
Gain % 4% 24%
for every 1 share previously held
(a)
Nubo Co.
PAT 166

Supermarket division Aircraft part division

PAT 83 PAT
PE Ratio 7 PE Ratio
MV of division 581 MV of division
Pay off NCL & CL -482
Gain 99

If Nubo Co. sells assets of supermarket division

NCA 442.75
CA 68.32
511.07
Pay off NCL & CL -482
Gain 29.07

Debt funds available

Total NCA and CA in the new company 300.6

Cash Available 399.6

(b)

Supermarket Aircraft
Value of divisions 581 996
Debt funds available 470.4 201.6
NCL 387 0
CL 95 0
aft part division
83
12
996
December 2012 Question #3

Sigra
PAT 4950
Market Value 39600
PE Ratio 8
Number of shares 11000
MV per share 3.6
EPS 0.45

Method 1: Cash Offer

Total
Cash offered 6250
Pre-acquisition -5625
Gain 625
%gain 11.11%

Method 2: SFS offer

Synergy Savings 1687.5
Pre-acquisition - Sigra 39600
Pre-acquisition - Dentro 5625
Total Value of New Co. 46912.5
Number of shares in new company 12875
Value per share 3.64

Total
Pre-acquisition 5625
Offer 6831.92
Gain 1206.92
%gain 21.46%

Method 3: Bond offer

MV of a bond = PV of Cash inflows discounted at cost of debt

IRR from currently issued bond

Year Cash Flows par value
0 (104.00) coupon rate
1 6 IRR
2 6
3 106

Assuming IRR of newly issued bond is same

Year Cash Flows par value
0 coupon rate
1 2 MV
2 2
3 102

Total
Pre-acquisition 5625
Offer $7,266.66
Gain 1641.66
%gain 29.18%
 Dentro
625
5625
9
1250
4.5
0.5

Per share
5
4.5
0.5
11.11%

Per 2 shares
9
10.93
1.93
21.46%

at cost of debt

100
6%
4.54%
 100
2%
$93.01

Per 16 shares
72
$93.01
$21.01
29.18%
June 2016 Question #2

Tidded Co.
Founders % 45%

As implied by the Initial offer

Louieed Co. Tidded Co.
Value of Shares 4144 1828.24
Value per share 12.19 20.31
EPS 0.87 1.42
P/E Ratio 14 14.28

As implied by the 2-for-1 share offer

Louieed Co. Tidded Co.
Value of Shares 4144 2193.88
Value per share 12.19 24.38
EPS 0.87 1.42
P/E Ratio 14 17.14

As implied by the cash offer

Louieed Co. Tidded Co.
Value of Shares 4144 2047.50
Value per share 12.19 22.75
EPS 0.87 1.42
P/E Ratio 14 16.00

As implied by the mixed offer

Louieed Co. Tidded Co.
Value of Shares 4144 2135.33
Value per share 12.19 23.73
EPS 0.87 1.42
P/E Ratio 14 16.68

(b)
Share-for-share offer
No funding required as you only exchange shares

Cash offer
Total Cash required 2047.5
Cash and Cash equivalents available -284
Extra funding required 1763.5

Mixed offer
Total Cash required 819
Cash and Cash equivalents available -284
Extra funding required 535

Impact on EPS
SFS Cash Mixed
Number of shares 520 340 448
Total Earnings 444.00 326.83 400.54
EPS 0.85 0.96 0.89

Impact on gearing ratio

Gearing ratio = D/D+E

Prior to Bid 11.5%

SFS offer 10.55%

Cash offer 35.30%
Mixed offer 18.44%
Base Case NPV

Years 0 1 2
Operating Cash Flows 2 14.5
Marketing Costs (9) (2)
Pre-Tax Cash Flows (7.00) 12.50
Tax
WC (3.00) (0.24) (0.19)
CI Investment (30.60)
Net Cash Flows (33.60) (7.24) 12.31

Base Case NPV (0.92)

Financing side effects
Issue cost (1.28)
Tax Shield on loan 0.68
Subsidy 3.04
Tax Relief Loss (7.53)
Total Benefit of financing side (5.09)

APV (6.01)
 Working 1: TAD
3 4 5
15.225 15.834 Y0
(2) (2) Y1
13.23 13.83
(0.31) (4.33) Y2
(0.17) 3.61
13.50 Y3
13.05 30.63 (4.33)
Y4
NBV
Realisable Value
Gain on Disposal

Working 2: Tax payable

Years
Cash flows
TAD

Tax payable on
Tax @ 30%

Working 3: Working Capital

Years
WC required
WC invested/releas

Working 4: Modigliani & Miller theo

ke = kei + (1-T) x (kei - kd) x (Vd/ Ve)

10.5% = kei + (1-30%)*(kei-5.4%)*((225
Solving this equation =>

Working 5: Tax Shield on Loan

Years
Tax Shield
PV of Tax Shield

Working 6: Subsidy

Years
Subsidy
PV of subsidy

Working 7: Tax Relief loss

Years
Tax relief loss
PV of tax relief loss
 30.60
(7.65)
22.95
(5.74)
17.21
(4.30)
12.91
(3.23)
9.68
13.50
3.82

2: Tax payable

1 2 3 4 5
(7.00) 12.50 13.23 13.83
(7.65) (5.74) (4.30) (3.23)
(14.65) 6.76 8.92 10.61
1.03 14.42
(0.31) (4.33)

3: Working Capital

0 1 2 3 4
3.00 3.24 3.43 3.61 3.75
(3.00) (0.24) (0.19) (0.17) 3.61

4: Modigliani & Miller theory

+ (1-T) x (kei - kd) x (Vd/ Ve)

ei + (1-30%)*(kei-5.4%)*((225/100*107)/(125*3.20)
s equation => kei = 9%

5: Tax Shield on Loan

2.5% - 30 Basis points/0.3% = 2.2%
1 2 3 4 5
0 0.20196 0.20196 0.20196 0.20196
 $0.68

: Subsidy

1 2 3 4
0.8568 0.8568 0.8568 0.8568
$3.04

: Tax Relief loss

0 1 2 3 4 5
-90 7 0.25704 0.25704 0.25704 0.25704
elief loss $7.53
December 2018 Question #3

APV Calculation

Years 0 1 2
Post-tax operating cash flows 28.50 36.70
Investment (150.00)
Realisable Value
Working Capital (6.00) (0.48) (0.39)
Cash Flows (156.00) 28.02 36.31

Base Case NPV (5.07)

Financing side effects
Issue Cost (2.47)
Tax Shield on loan 2.46
Subsidy benefit on subsidised l 9.09
Subsidy benefit on bank loan

APV (5.07)
 Working 1: Working capital
3 4
44.40 50.90 Years 0
45.00 Required 6.00
Invested/Released (6.00)
(0.34) 7.21
44.06 103.11 Working 2: CAPM Model

ke 12%

Working 3: Tax Shield on loan

Years 1
Tax Shield 0.744
PV of Tax Shield $2.46

Working 4: Subsidy benefit on subsidised loan

Years 1
Subsidy 2.744
PV of subsidy $9.09

Working 5: Subsidy benefit on bank loan

 1 2 3 4
6.48 6.87 7.21 7.50
(0.48) (0.39) (0.34) 7.21

2 3 4
0.744 0.744 0.744

fit on subsidised loan

2 3 4
2.744 2.744 2.744

fit on bank loan

Rights Issue 30 Working 1: Necessary CAPE
Total Number of shares 120
Dividend required 88.8
Sales Revenue 540.8
Operating profit 108.16 b/d
Proceeds from sale of NCA 16.3
Investment 3.12 investment
Necessary CAPEX 4.4

$m
Operating Profit 108.16
Interest (10.80) Working 2: Subsidiary
97.36
Tax @ 30% (29.21) PBT
68.15 Tax @ 20%
Add: dep 30.00 PAT
Less: Profit on disposal (5.90) Dividend
Proceeds from sale 16.30
Working Capital Investment (3.12)
Necessary CAPEX (44.80)
Dividend 20.52
Tax @ 10% on subsidiary's profits (4.50)

Forecast dividend capacity 76.65

Extra dividend required 12.15

Arthuro Co. needs 32.67
Dividend subsidiary needs to declare 34.39
king 1: Necessary CAPEX

PPE A/c

110 depreciation 30

44.8 disposal 10.4

c/d 114.4
154.8 154.8

king 2: Subsidiary

45
-9
36
20.52
December 2016 Question #3

Dividend Payout Ratio

Chithurst Co. Eartham Co. Iping Co.

2012 42.86% 40.00% 46.67%
2013 41.25% -150.00% 19.32%
2014 35.11% 40.00% 33.05%
2015 34.02% 40.00% 31.82%

Leftover Funds

Chithurst Co. Eartham Co. Iping Co.

2012 26 27 3
2013 18 (40) 7
2014 38 24 4
2015 43 43 6

Dividend Valuation Model

P/ ke

Chithurst Co.
Valuation 300
Market capitalisation 608

D0(1+g)/ ke - g
g = ((Latest dividend/Oldest dividend)^-n ) -1

Eartham Co.
g - 1 year 9%
g - 3 year 8.1%
Valuation using 1 year grow 1066.67
Valuation using 3 year grow 879.20
Market Capitalisation 1042

Iping Co.
g - 1 year 7.69%
g- 3 year 6.27%
Valuation using 1 year grow 717.07
Valuation using 3 year grow 577.07
Market Capitalisation 1164
December 2016 Question #2

Net Present Value

Years 0 1 2
Sales Revenue 13250000 16695000
Varibale Cost (5787600) (7292376)
Marketing Expenditure (1500000)
Fixed Cost (900000) (945000)
TAD (3200000) (2560000)
PBT 1862400 5897624
Tax @ 25% (465600) (1474406)
PAT 1396800 4423218
Add: TAD 3200000 2560000
Initial Investment (16000000)
Working Capital (1025000) (41000) (53300)
Cash Flows (17025000) 4555800 6929918
Discount @ 11% 4104324 5624477
NPV 7797990

PV of Inflow Phase 24822990

Duration 2.78

Sensitivity Analysis

Sales Revenue 13250000 16695000 22788675

Tax (3312500) (4173750) (5697169)
9937500 12521250 17091506

PV of Sales Revenue 43434032

18%

If the Sales Revenue reduces by 18%, the NPV will fall to zero.
 Working 1: Sales Revenue

3 4 Years Sales Price

22788675 23928109 1 100.00
(9954093) (10451798) 2 105.00

(992250) (1041863) 3 110.25

(2048000) (8192000) 4 115.76
9794332 4242448
(2448583) (1060612) Working 2: Variable Cost
7345749 3181836
2048000 8192000 Years VC per unit
1 43.68
(55965) 1175265 2 45.86
9337784 12549101 3 48.16
6827707 8266482 4 50.57

Working 3: TAD

Years
Y0 16000000
Y0-Y1 -3200000
Y1 12800000
23928109 Y1-Y2 -2560000
(5982027) Y2 10240000
17946082 Y2-Y3 -2048000
Y3 8192000
Y3-Y4 -1638400
Y4 NBV 6553600

Balancing allowance for Y4

Working 4: Working Capital

Years 0
Working Capit 1025000
Investment/ R -1025000
s Revenue

Units SR
132500 13250000
159000 16695000

206700 22788675
206700 23928109

able Cost

Units VC
132500 5787600
159000 7292376
206700 9954093
206700 10451798

8192000

king Capital

1 2 3 4
1066000 1119300 1175265 1234028.25
-41000 -53300 -55965 -1175265
Owed By Owed to Local currency $m
Armstrong Horan 12.17 12.17
Horan Massie 42.65 3.97
Giffen Armstrong 21.29 3.88
Massie Armstrong 19.78 19.78
Armstrong Massie 1.57 2.13
Horan Giffen 16.35 2.98
Giffen Massie 1.55 2.11

Owed to Armstrong Horan

Owed By
Armstrong 12.17
Horan
Giffen 3.88
Massie 19.78
Owed By 23.66 12.17
Owed To -14.30 -6.96
Net receipt/payment 9.36 5.21

Massie will pay Horan 5.21

Massie will pay Armstrong 6.35
Giffen will pay Armstrong 3.01

30.11 25000000
LIBOR 3.60%
Massie Co. rate 3.20%

If interest rate decreases, future price increases

If interest rate increases, future price decreases

Options on futures
-> call option (WHEN YOU DEPOSIT)

Hedge in case of depositing funds

You are worries that interest rates may decrease
Future price will increase so we will buy at lower price now and sell again later

-> put option (WHEN YOU BORROW)

Hedge in case of borrowing funds

You are worried that interest rate may increase in future
Buy at lower price and sell at higher price

Number of contracts 50

(Always go for the 1st month after the date of deposit)

i.e. December call option

1-Sep 30-Nov 30-Dec

Interest rate today 3.60%
Future price today 96.40% 95.90% x
December future price available 95.76% 95.74% x
Basis 0.64% 0.16% 0

4.10%

Interest rcvd if rate goes up to 4.1% 462500

Exercise price/ Strike price 97% 96.50%

Future Price 95.74% 95.74%

No No (you wouldn't buy at 97
Premium to be paid -4000 -22750
462500 462500
Net receipts 458500 439750

Effective interest rate 3.67% 3.52%

Collars
If interest rate goes up by 0.5%
Buy call Sell put
Exercise price 97% 96.50%
Future price 95.74% 95.74%
lapse exercise
Premium
payable 4000
receivable 15375
Loss on exercise 95000
Interest received 462500
Net receipt 378875
Effective interest rate 3.03%

Effective interest rates Options Collars

97% 96.50%
4.10% 3.67% 3.52% 3.03%
3.10% 2.67% 2.76% 2.79%
Giffen Massie

2.13 14.30
2.98 3.97 6.96
2.11 5.99
19.78
2.98 8.22
-5.99 -19.78
-3.01 -11.56
wouldn't buy at 97% and sell it at 95.74%)

If interest rate goes down by 0.5%

Buy call Sell put
Exercise price 97% 96.50%
Future price 96.74% 96.74%
lapse lapse
Premium
payable 4000
receivable 15375
Interest received 337500
Net receipt 348875
Effective interest rate 2.79%
 1-Sep 30-Nov 30-Dec
Interest rate today 3.60%
Future price today 96.40% 96.90% x
December future price available 95.76% 96.74% x
Basis 0.64% 0.16% 0

3.10%

Interest rcvd if rate goes down to 3.1% 337500

Exercise Price/ Strike price 97% 96.50%

Future Price 96.74% 96.74%

No Yes
Premium to be paid -4000 -22750
337500 337500
Gain 30000
Net receipts 333500 344750

Effective interest rate 2.67% 2.76%

June 2016 Question #4
(amount in $m)
Payment made by Pault co. -19.388

Year 1 calculation

Receipt at 3.5% 14
Payment -19.388
Net Payment -5.388

Year 2 calculation

If you deposit 100 for 1 ye 103.7

If you deposit 100 for 2 ye 108.68
s=p(1+i) 108.68 = 103.7 (1+i)
Variable rate 4.80%

Receipt at 4.6% (4.8% less 18.4

Payment -19.388
Net Payment -0.988

Year 3 calculation

Variable rate 5.61%

Receipt at 5.41% 21.64

Payment -19.388
Net receipt 2.252

Year 4 calculation Year 1

Year 2
Variable rate 6.31% Year 3
Year 4
Receipt at 6.11% 24.44
Payment -19.388
Net receipt 5.052

ii) Interest payment liability

If yield curve rate is 4.5%

Receipt at 4.3% 17.2

Payment -19.388
Net payment -2.188

If yield curve rate is 2.9%

Receipt at 2.7% 10.8

Payment -19.388
Net payment -8.588
Payment/Receipt
-5.388
-0.988
2.252
5.052
June 2014 Question #1

CMC base currency CHF

Payment due in 4 months in $ 5060000

#1: Forwards

Net payment using forward rate 4739159

#2: Futures

3-month 4-month 6-month

Future price 1.0647 1.0651 1.0659

Net payment in CHF 4750728

Number of contracts 38.01

#3: Currency options

contract currency CHF

we will buy put option

Exercise Price : 1.06 Exercise Price : 1.07

Payment in CHF 4773585 Payment in CHF
Number of contracts 38.1886792 Number of contracts
Approx. 38 Approx.
Hedged amount 4750000 Hedged amount
Unhedged amount in $ 25000 Overhedged amount in $

Unhedged amount in CHF 23415 Overhedge in CHF

Premium in $ 102600 Premium in $
Premium in CHF 96474 Premium in CHF

Net payment 4869889 Net payment

b) Swap for loan

Loan amount 60000000

CMC Counterparty Total

2.20% AR+0.8% AR+3%
AR+0.40% 3.80% AR+4.2%
 1.20% benefit
0.60% CMC benefit
CMC Counterparty 0.60% CP benefit
2.20% AR+0.8%
AR -AR
-2% 2%
AR-0.2% 3.20%

CMC will borrow at the annaul yield rate after paying 0.2% as bank charge.
4728972
37.83
38
4750000
-22500

-21073
124925
117466

4846393
Todays date 1-Jun
Borrowing amt 34000000
Borrowing period in months 6

#1: Futures

Number of contracts 68

1-Jun 31-Oct 31-Dec

Interest Rate 96.4 95.6 x
Future price 95.84 95.44 x
Basis 0.56 0.16 0

We are worried about interest rates increasing

Future prices will go down if interest rate goes up
We will sell now, buy later

We will sell at 95.84

We will buy at 95.44

Gain on futures 68000

Additional Cost 136000

Net Additional Cost 68000

#2: Options on Futures

Exercise Price 95.5 96

Future Price 95.44 95.44
Exercise? Yes Yes

Gain on exerci 10200 95200

Premium Payab 51680 86360
Additional Cost 136000 136000

Net Additional 177480 127160

#3: Collar on Options on Futures

Buy Put Sell call

Exercise price 95.5 96
Future price 95.44 95.44
Exercise? Yes No

Gain on exercise 10200

Premium payable 51680
Premium receivable 37910
Additional Cost 136000

Net Additional Cost 139570

b) Mark-to-Market: Daily Settlements

2-Jun -10000 (loss)

3-Jun -11250 (loss on sale of 30 contracts)
-5000 (loss on remaining contracts)
4-Jun 4000 (gain on 20 contracts)
December 2018 Question #2

Todays date 30-Nov

Nutourne - base country USA
Date of Receipt 31-May
Amount in CHF 12300000

#1: Futures
Number of contracts 98.4
Approx. 98
Hedged amount in CHF 12250000
Unhedged amount in CHF 50000

Unhedged amt exchanged a 51790

31-Mar 31-May 30-Jun

Future Price 1.0345 1.0361 1.0369

12692225
51790
Net receipt 12744015

#2: Options on futures

Number of contracts 98
Hedged amount in CHF 12250000
Unhedged amount in CHF 50000

Unhedged amt exchanged a 51790

If exercised, 12709375
Premium in. $ 105350

Net receipt 12655815

Let us now find an exchange rate which will give us the same amount of receipts as futures d

12692225 = 12250000 * x - 105350

Solving the above equation,
x= 1.0447
Exchange rate $1.0447/CHF 1
Initial Margin 142100
Maintenance Margin 133280
Loss on first day per contract 137.5
Total loss 13475
Balance on Margin Account 128625
Payment required to meet maintenance 4655
of receipts as futures deal after payment of premium
June 2018 Question #4

Advarane group base currency CHF

Payment to Elted Co. (in $m) 3700000

Receipt from Elted Co. (in $m) 10150000
Net receipt 6450000

#1: Money Market Hedge

We will receive dollars.

We will borrow USD today such that when we have to repay in 6 months, we have to repay $6

Amount to be brorowed 6371419

in CHF 5677615

Value of CHF in 4 months time 5728713

#2: Exchange traded currency futures

Future price in 4 months

3m 4m 6m
Future price 1.1213 1.1210 1.1204

We can convert 6.45m at 1.121/1 5753791

Multilateral netting
(Amt in CHF)
Owed To Adverane Bosha Cogate Diling
Owed By
Adverane 15900000 4460000
Bosha 26608250 19843984
Cogate 24159158 5067356.59
Diling 12290538 16218442
Total 36449696 32118442 26608250 29371340
Owed by 20360000 46452233 29226514 28508980
Net Receipt/Payment 16089696 -14333791 -2618265 862360

Bosha Co. will pay Diling Co. 862360

Bosha Co. will pay Adverane Co. 13471431
Cogate Co. will pay Adverane Co. 2618265
, we have to repay $6.45 million

Total Exchange Rates

20360000 1CHF= 0.9358 euro

46452233 1.1209 $
29226514 3.1569 BRL
28508980
BSOP

volatility (s) 25%

Pa 28
time (t)(in years) 2
risk-free rate of interest (r) 5%
Pe 24

Using BSOP calculator,

d1 0.8956
d2 0.5421
Nd1 0.8148
Nd2 0.7061
c 7.48
p 1.2

call option 7.48

Overall value of the project 11.48

SOLUTION
December 2020 Question #2

NPV
Years 0 1 2
Pre-tax contribution 419.40 500.20
Fixed costs (270.00) (291.60)
TAD (175.00) (175.00)
P/LBT (25.60) 33.60
Tax @25% (2.00)
P/LAT (25.60) 31.60
TAD 175.00 175.00
Investment (775.00)
Working capital invested/r (25.00) (2.50) (2.75)
Cash flows (800.00) 146.90 203.85

Cash flows in Euro (80.73) 14.01 18.39

Transfer price 1.14 1.32
Manufacturing cost (0.23) (0.26)
Profit on component 0.91 1.05
Tax payable (0.18) (0.21)
Net cash flows (80.73) 14.75 19.23

NPV (3.33)
 (all values in CLm)
3 4 Working #1: Tax
671.30 961.20
(314.90) (340.10) Years 1 2
(175.00) (175.00) PBT (25.60) 33.60
181.40 446.10 loss carried forward (25.60)
(45.35) (111.53) Tax payable on 8.00
136.05 334.58 Tax amount 2
175.00 175.00
214.21 Working #2: Working Capital
(3.03) 33.28 Years 0 1
308.03 757.06 WC required 25.00 27.50
(in euro m) WC invested/ -25.00 -2.50
25.76 58.72
1.64 2.22 Working 3: Value of Land and building at Year 4
(0.33) (0.44)
1.31 1.78 Years
(0.26) (0.36) 0 75
26.81 60.14 1 97.5
2 126.75
3 164.775
4 214.2075

Working 4: Calculation of Exchange rate

Years CL Euro
0 9.91 1.00
1 10.901 1.04
2 11.9911 1.0816
3 13.19021 1.103232
4 14.509231 1.12529664

Exchange rate
Years
0 9.91
1 10.48
2 11.09
3 11.96
4 12.89
 3 4
181.40 446.10

181.40 446.10
45.35 111.525

2 3 4
30.25 33.28 36.60
-2.75 -3.03 33.28

uilding at Year 4

xchange rate
December 2021 Questio

i)Cost of equity

CAPM

Risk free rate of return

Market risk premium

(we use asset beta becaus

(we will calculate beta asse

Liyu Co.
Equity beta
Asset beta

Sanwenyu Co.
Beta equity
Asset beta

Asset beta of Zhichi Co.

0.98 = 60% * x + 40% * 1.

Solving the above equation

Cost of equity

ii) NPV

Years
Sales Revenue
Costs
TAD
CF before Tax
Tax @ 20%
CF after Tax
TAD
Investment
Working Capital
Net Cash Flows

NPV
iii) APV

Financing side effects

Issue costs
PV of tax savings on intere
PV of subsidy benefit
PV of tax loss on subsidy b

APV
er 2021 Question #1

rate of return 4.80%

sk premium 8%

asset beta because we are assuming project is all equity financed)

calculate beta asset of Liyu and beta asset of Sanwenyu and take the weighted average)

1.2
0.98

1.33 (using CAPM formula to find beta equity)

1.10

eta of Zhichi Co.

0% * x + 40% * 1.10%
he above equation for x, 0.90

12%

0 1 2 3 4 5
10.00 40.00 48.00 57.60
(12.00) (32.00) (19.20) (23.04)
(10.50) (8.92) (7.59) (22.99)
(12.50) (0.92) 21.21 11.57
2.50 0.18 (4.24) (2.31)
(12.50) 1.58 21.40 7.33 (2.31)
10.50 8.92 7.59 22.99
(70.00) 42.00
(10.00) 4.00 (1.20) (1.44) 8.64
(80.00) 2.00 9.30 27.54 80.96 (2.31)

(1.00)
g side effects

-2.47
savings on interest $1.57
bsidy benefit $8.32
loss on subsidy benefi ($1.57)

4.84
Working #1: TAD

Year 0 70.00
Y0-Y1 10.50
Year 1 59.50
Y1-Y2 8.92
Year 2 50.58
Y2-Y3 7.59
Year 3 42.99
Y3-Y4 6.45
Year 4 36.54
Loss on dispo 16.54
Working #2: Working Capital

Years 0 1 2 3
Working Capit 10 6 7.2 8.64
Working Capit 10 -4 1.2 1.44

Working #2: Tax

Years 0 1 2 3
Cash Flows (12.50) (0.92) 21.21
Tax @20% -2.5 -0.185 4.24275

Working #3: Subsidy benefit

Years 0 1 2 3
Subsidy benefit 2.4 2.4 2.4
PV of subsidy benefit $8.32

Working #4: Tax loss on subsidy benefit

Years 0 1 2 3
Tax loss 0 0.48 0.48
PV of Tax loss $1.57

Working #5: Tax savings on Interest Payable

Years 0 1 2 3
Interest payable 0 0.48 0.48
PV of tax savings $1.57
4
 -8.64

4
11.57
2.31425

4
2.4

4 5
0.48 0.48

4 5
0.48 0.48
Today's date 1/10/2017
Date of investment 1/2/2018
Amount 27000000
Investment period 5 months
Investment end 30/10/18

Central Bank base rate 4.20%

#1: FRA

We are investing 4 months from now until 9 months from now, therefore the rate is 5.02%

If Interest rate goes up by 1.1%

Interest Amount 562500
Base Rate 5.30%
FRA 5.02% -31500
Net Income 531000

Effective Interest Rate 4.72%

#2: 3-month futures

Contract size 500000

Number of contracts required 90

We will choose March futures

We are worried about interest rates falling, therefore future prices will increase, we will buy n

If interest rate goes up by 1.1%

1/10/2017 1/2/2018 31/3/18

Interest rate 95.8 94.7
Future price 94.78 94.36
1.02 0.34 0

We will buy at 94.78

We will sell at 94.36

Loss on futures -47250

Interest on Investment 562500
Net receipts 515250
Effective Interest Rate 4.58%

#3: Options on 3-month futures

We are investing
we will buy call option

If interest rate goes up by 1.1%

Exercise Price 94.25 95.25
Future price 94.36 94.36
exercise? yes no
Gain on exercising 12375
Premium payable -61312.5 -11025
Investment Income 562500 562500
Net Receipt 513562.5 551475

Effective Interest Rate 4.56% 4.90%

Effective Interest Rates in all the options

FRA Futures Options on Futures

94.25%
If interest rate goes up by 1.1 4.72% 4.58% 4.56%
If interest rate goes down by 0 4.72% 4.58% 4.57%
erefore the rate is 5.02%

If Interest rate goes down by 0.6%

Interest Amount 371250
Base Rate 3.60%
FRA 5.02% 159750
Net Income 531000

Effective Interest Rate 4.72%

will increase, we will buy now and sell later

If interest rate goes down by 0.6%

1/10/2017 1/2/2018
Interest rate 95.8 96.4
Future price 94.78 96.06
1.02 0.34

We will buy at 94.78

We will sell at 96.06

Gain on futures 144000

Interest on Investment 371250
Net receipts 515250
 Effective Interest Rate 4.58%

If interest rate goes down by 0.6%

Exercise Price 94.25 95.25
Future price 96.06 96.06
exercise? yes yes
Gain on exercising 203625 91125
Premium payable -61312.5 -11025
Investment Income 371250 371250
Net Receipt 513562.5 451350

Effective Interest Rate 4.57% 4.01%

ons on Futures
95.25%
4.90%
4.01%
31/3/18

0
December 2011 Question #2

Spot yield rates applicable to Levante Co. ( Credit A rating )

Years 1 2 3 4 5
Yield Rates 3.85% 4.46% 5.07% 5.80% 6.12%
Bond 4 4 104

Bond value based on credit A rating 97.18

Current price of Bond 98.71

Fall in value 1.55%

ii) Value of 5% bond 95.72

Therefore, the bond will be offered at a discount.

New coupon rate for bond valued at $100

Solve the following equation,

(R*(1+3.85%)^-1)+(R*(1+4.46%)^-2)+(R*(1+5.07%)^-3)+(R*(1+5.8%)^-4)+(100*(1+6.12%

With trial and error, (also because we know the value has to be above 5%, as 5% bond value

Coupon rate (R) 6%

%)^-4)+(100*(1+6.12%)^-5) = 100

5%, as 5% bond value is 95.72)

`
June 2023 Question #1

b)i) Post-acquisition weighted average cost of capital

Post-acquisition Asset beta 0.97

Post-acquisition Equity beta 1.31
Cost of Equity 14.28%
Pre-tax cost of debt 7.80%
Weighted Average cost of capital 12%

ii)Free Cash Flows to firm

(in $millions)
Years 1 2 3 4
PBIT 27.20 28.56 29.99 31.49

Tax @ 18% (4.90) (5.14) (5.40) (5.67)

Cash Flows after tax 22.30 23.42 24.59 25.82

Necessary CAPEX (2.70) (2.90) (3.04) (3.19)

Net Free Cash Flows 19.60 20.52 21.55 22.63

PV of CF from Y1-Y4 63.58

PV of CF from Y5 onwards 164.56
PV of post-tax synergies 27.94

Total MV of firm 256.08

MV of equity post-acquisition 179.26

Additional Value created 21.26

iii) Shareholder wealth

Joshua Fraser
Number of shares 40.00 10.00
MV of equity pre-acquisition 102.00 56.00
MV of equity post-acquisition 102.43 76.82
% change in equity value 0.42% 37.19%

Pre-acquisition dividend 2.70 3.20

Post-acquisition dividend 2.80 2.10
% change in dividend value 3.72% -34.36%
Working #1: Share-for-share exchange

New shares issued to Fraser Co. 30

Total Number of issed shares 70

Working #2: Post-acquisition equity value

MV of equity attributable to Fraser shareholders 102.43

MV of equity attributable to Joshua shareholders 76.82

Working #3: Post-acquisition dividend

Joshua Co. 2.80

Fraser Co. 2.10
Today's date 1-Aug
Borrowing 48000000
Borrowing date 1-Dec
Central bank base rate 3.70%

#1: Swap

Fitzharris Counterparty Total

BR+0.50% 4.80% BR+5.30%
4.60% BR+1.30% BR+5.90%
0.60% (Total benefit)
Benefit for Fitzharris 0.30%

BR+0.50% 4.80%
(BR) BR
3.80% -3.80%

4.30% BR+1%

Effective Interest Rate for Fitzharris Co. (after addin 4.35%

#2: Collar

buy put, sell call

Number of contracts 576
Contract size 1000000

If interest rate goes up by 0.4% If interest rate goes down b

1-Aug 1-Dec 31-Dec

IR 96.3 95.9 x IR
FP 95.85 95.81 x FP
Basis 0.45 0.09 0 Basis

Buy put Sell call

EP 95.75 96.25 EP
FP 95.81 95.81 FP
Exercise? lapse lapse Exercise?
Premium payable 303840
Premium Receivable 285120 Loss on exercise
Interest Payable 6624000 Premium Payable
Net cost 6642720 Premium Receivable
 Interest Payable
Effective Interest Rate 4.613% Net cost

Effective Interest Rate

al benefit)

erest rate goes down by 0.4%

1-Aug 1-Dec 31-Dec

96.3 96.7 x
95.85 96.61 x
0.45 0.09 0

Buy put Sell call

95.75 96.25
96.61 96.61
No Yes

on exercise 518400
mium Payable 303840
mium Receivable 285120
est Payable 5472000
6009120

ctive Interest Rate 4.173%

December 2012 Questio

Years
Sales Revenue
Costs
Investment

Pv of Y0-Y3 Cash Flows

PV of Y4-Y5 Cash Flows

NPV

NPV = PV of cash inflows -

If PV of cash outflows falls

NPV must fall by

Sales Price must fall to
solving the above equation

% fall in sales price

b) Capital Rationing Mod

Constraints

4000P1 + 800P2 + 3200P3

1100P1 + 2800P2 + 3562P
2400P1 + 3200P2 + 0P3 +

where,
ember 2012 Question #4

0 1 2 3 4-18
s Revenue 4200000
(3230000)
(2500000) (1200000) (1400000)

f Y0-Y3 Cash Flows (4717352)

f Y4-Y5 Cash Flows 5100260

382908

= PV of cash inflows - PV of cash outflows

of cash outflows falls to 0, the npv will fall to 0

must fall by 4717352

s Price must fall to 4717352 = (300000 x sp+Q6)*(7.702-2.444)
ng the above equation, 13.76

ll in sales price 1.73%

apital Rationing Model

0P1 + 800P2 + 3200P3 + 3900P4 + 2500P5 >/= 9000

0P1 + 2800P2 + 3562P3 + 0P4 + 1200P5 >/= 6000
0P1 + 3200P2 + 0P3 + 200P4 + 1400P5 >/= 5000

P1 = investment in Project 1
P2 = investment in Project 2
P3 = investment in Project 3
P4 = investment in Project 4
P5 = investment in Project 5
September 2022 Question #1

b)i) NPV of Investment A

Years 0 1 2 3
Sales Revenue 12.75 13.39 14.06
Production Costs (5.25) (6.57) (8.05)
TAD (3.50) (2.63) (1.97)
PBT 4.00 4.19 4.04
Tax @ 20% (0.80) (0.84) (0.81)
PAT 3.20 3.35 3.23
TAD 3.50 2.63 1.97
Initial Investment (14.00)
Working Capital (1.28) (0.06) (0.07) (0.07)
Post-Tax Cash Flows (15.275) 6.636 5.910 5.127

NPV 5.35 approx.

ii) NPV of Investment B before offer from Kero Co.

Years 0 1 2 3
After-Tax Cash Flows -34.6 1.4 1.96 2.744

PV of CFs from Y1-Y4 -26.35

PV of CFs from Y5 onwards 26.37

Total NPV 0.027030 approx.

NPV of Investment B after offer from Kero Co.

Pva 29.86
Pve 27
s 40%
r 5%
t 3

Using BSOP calculator,

d1 0.7084
d2 0.0156
nd1 0.7606
nd2 0.5062
c 10.95
p 4.33

According to BSOP, the value of the potential offer is 4.33 (Pva>Pve)

Total NPV 4.357030

 4 5-25 Working #1: TAD
14.76
(9.80) Y0 14.00
(5.91) Y0-Y1 -3.50
(0.95) Y1 10.50
0.19 Y1-Y2 -2.63
(0.76) Y2 7.88
5.91 Y2-Y3 -1.97
Y3 5.91

5.149 5.400
Working #2: Working Capital

Years 0 1
WC required 1.28 1.34
WC invested/r (1.28) (0.06)
4
5.488
 2 3 4
1.41 1.48
(0.07) (0.07)
Lough Co. base currency USD
(all amts in USD m)
Owed TO Lough Fitz Gahana Adalar
Owed BY
Lough 47.62 17.47
Fitz 75.75 4.60 35.48
Gahana 48.20 18.76
Adalar 12.8
Total 88.55 48.20 52.22 71.71
Owed BY 65.09 115.83 66.96 12.8
Net receipt/Payment 23.46 -67.63 -14.74 58.91

Fitz Co. will pay Lough Co. 23.46

Fitz Co. will pay Adalar Co. 44.17
Gahana Co. will pay Adalar 14.74

Payment due in SEK m 125000000

#1: Forward market

Net payment using forward rate 14652788

#2: Money Market Hedge

We will invest enough amount today so that in 5 months time we get SEK 125m with interest

Amount to be invested 123915737

Amount in $ 14671877

Payment in 5 months time 14806369

amts in USD m)
Total

65.09
115.83
66.96
12.8

EK 125m with interest

Today's date 1-May
Payment 14500000
Receipt 37400000
Net receipt 22900000
Receipt date 31-Aug

#1: Forward Market

Net Receipt using forward rate 96461668

#2: Currency Futures

30-Jun 31-Aug 30-Sep

Future price 0.2366 0.2374 0.2378

Receipt 96461668
Number of contracts 192.92 193
Hedged amount 96500000
Overhedged amount in $ 9100

Payment of overhedged amt at forward r 38397

Net receipt 96461603

#3: Currency Options

We will buy september call option

Number of contracts 193.41 193

Hedged amount 22851200
Unhedged amount 48800

Receipt from options 96500000

Unhedged amt exchanged at forward rat 205560
Premium to be paid today in $ 135100
Premium to be paid today in MR 573673

Net receipt 96131887

We will go for forward rate as it gives the most net receipt

June 2024 Question #3

Garnod Co. Pilsur Co.

Number of shares (in millio 80 100
Share price 6 5.4
FCFTE 60 70
MV of equity 480 526.3

MV of Pilsur Co.'s equity

Ke 15%
MV 526.3

MV of combined company 1167.6

Additional Value created 161.3

Share price of Pilsur pre-acquisition 5.4

Required share price post-acquisition

Target price Garnod Co. would pay, if 60% gains accrued to its shareho

% of gains if Garnod paid the minimum share price required

 6.156

590.82

44.64%
June 2024 Question #2

i) Investment in office pods

Years 0 1 2 3
Contribution 24.00 42.30 40.10
Fixed Costs (8.00) (8.40) (8.82)
Realisable Value
Profit before Tax 16.00 33.90 31.28
Tax @ 20% (4.24)
Profit after Tax 16.00 33.90 27.04
Initial Investment (60.00)
Working Capital (6.00) (2.64) 0.00 0.86
Cash Flows (66.00) 13.36 33.90 27.90

NPV 14.80

ii) BSOP

Pa 52.7
Pe 80
s 25%
r 3%
t 4

Using BSOP calculator,

d1 -0.3448
d2 -0.8448
nd1 0.3651
nd2 0.1991
c 5.11
p 23.37

The option to make a follow-on investment is a call option.

Therefore, overall value = -1.89

The project still has a negative net present value of $1.89 m, therefore, should be rejected.
 Working #1: Working Capital

4 Year 0 1 2
34.10 Working capit (6.00) (8.64) (8.64)
(9.26) Working capit (6.00) (2.64) 0.00
5.00
29.84 Working #2: Taxation
(5.97)
23.87 Year 0 1 2
PBT 0.00 16.00 33.90
7.78 100% allowan -60
31.65 Tax loss c/f (16.00) (33.90)
Taxable Profit 0.00 0.00
Tax @ 20%

herefore, should be rejected.

 3 4
(7.78)
0.86 7.78

3 4
31.28 29.84

(10.10)
21.18 29.84
(4.24) (5.97)
Todays date

b) i) multilateral netting

Owed by
Mahoney
Mahoney
Mahoney
Yves
Yves
Yves
Imran
Imran

Owed by

Mahoney
Yves
Imran
Total
Owed by
Net receipt

Yves Co. will pay Mahon

Yves Co. will pay Olivier
Imran Co. will pay Olivie

ii) Hedging

#1: Forward contract

Net receipt using forward r

#2: Currency Futures

Future price

Amount in EUR
Number of contracts
Approx.
Hedged amount
Overhedged amount in BRL
Overhedged amount in EUR

Net receipt

iv) Currency Swap

Year
Investment
Net operating fee
Transfer proceeds
Cash flows

If currency swap is used

Conversion into Euros

swap

Cash Flows

NPV

If option is exercised

Year
Cash Flows
Premium
Exercising option
Cash Flows

NPV
 1-Feb

multilateral netting

Owed to Amt in local currency Amt in EUR

Imran PKR 5913 27.10
Oliviera BRL 160 30.69
Yves CAD 86 65.65
Imran PKR 3713 17.02
Oliviera BRL 456 87.47
Mahoney EUR 138 138.00
Yves CAD 39 29.77
Oliviera BRL 504 96.68

Owed To
Mahoney Yves Imran Oliviera Total
65.65 27.10 30.69 123.44
138.00 17.02 87.47 242.49
29.77 96.68 126.45
138.00 95.42 44.12 214.84
123.44 242.49 126.45
14.56 -147.07 -82.33 214.84

s Co. will pay Mahoney Co. 14.56

s Co. will pay Oliviera Co. 132.51
an Co. will pay Oliviera Co. 82.33

Forward contract

receipt using forward rate 122371369

Currency Futures

30-Jun 31-Jul 30-Sep

5.2956 5.3113 5.3427

unt in EUR 122380585

ber of contracts 244.76
245
ged amount 122500000
hedged amount in BRL -634250
hedged amount in EUR -119575.05

122380425

Currency Swap
Working: Exchange Ra
0 1 2 3
-1800 Years
operating fee 90 92 94 Exchange Rat
sfer proceeds 2900
-1800 90 92 2994

urrency swap is used

version into Euros

-150 7 6 150
67
-150.00 7 6 216.56

-1.17

ption is exercised

0 1 2 3
-150 7 6
-11
cising option 212.34
-161 7 6 212

-14.88
king: Exchange Rates

0 1 2 3
12 13.67 15.51 17.94
December 2023 Question #1

NPV

Years 0 1 2
Sales revenue 15125000 19346250
Variable Cost (5500000) (7035000)
Fixed Costs (750000) (787500)
TAD (4500000) (4500000)
PBT 4375000 7023750
Tax @ 20% (875000) (1404750)
TAD 4500000 4500000
Investment (50000000)
Working Capital (1443750) (402938) (503843)
Cash flows (51443750) 7597063 9615158

Cash flows in $ (15541918) 2317044 2960476

Pre-tax Contribution 167746 216605
Additional Tax (66717) (108129)
Tax on contribution (41936) (54151)
Net Cash Flows (15541918) 2376136 3014801

NPV 1076370

NPV using different Exchange rates

Years 0 1 2
Exchange Rates 3.31 3.37 3.41

Cash Flows in $ (15541918) 2254321 2819694

PV of contribution 485000
Additional Tax (64911) (102988)

Net Cash Flows (15056918) 2189410 2716707

NPV (509625)
 Working #1: Selling price and Variable cost

(in eratian pounds) Years 1

3 4 SP 275.00
24624600 28108080 VC 100.00
(8954400) (10221120)
(826875) (868219) Working #2: TAD
(4500000) (4500000)
10343325 12518741 Years 1
(2068665) (2503748) TAD 4500000
4500000 4500000
32000000 Working #3: Working Capital
(332514) 2683044
12442146 49198037 Years
Working Capital required
3941403 16034440 Invested/released
283656 333123
(163827) (204003) Working #4: Exchange rates
(70914) (83281)
3990318 16080279 Years ER Pound
0 3.31
1 3.48
2 3.65
3 3.80
4 3.95

3 4 ER Pound / $1
3.47 3.5
Years
3585633 14056582 0 3.31
1 3.28
(149039) (178839) 2 3.25
3 3.16
3436594 13877743 4 3.07

Working 5: Pre-tax contribution of compone

Years 1
in ER pounds 550000
in $ 167746
 ling price and Variable cost

2 3 4
288.75 300.30 312.31
105.00 109.20 113.57

2 3 4
4500000 4500000 4500000

orking Capital

0 1 2 3 4
1443750 1846687.5 2350530 2683044
-1443750 -402937.5 -503842.5 -332514 2683044

change rates

$
1.00
1.06
1.12
1.20
1.29

tax contribution of component

2 3 4
703500 895440 1022112
216605 283656 333123
$24m Loan

Start date
End date
Duration in months
Central bank base rate
Number of contracts
Contract size

If interest rate goes up to 5

we are worried about inter

IR
FP
Basis

we will sell at
we will buy at

Gain
Interest on Investment
Net Cost

Effective Interest Rate

$18m Investment

Start date
End date
Duration in months
Number of contracts

We will buy call options

If the interest rate goes do

Interest Rate
Future price
Basis
Exercise price
Future price

Gain on options
Premium
Interest
Net receipt

Effective Interest Rate

 1-May
1-Sep
on in months 4
l bank base rate 5.10%
er of contracts 64
500000

est rate goes up to 5.9%

worried about interest rates increasing, future prices will fall, we will sell now and buy later

1-Feb 1-May 30-Jun

94.9 94.1
94.55 93.96
0.35 0.14 0

94.55
93.96

47200
st on Investment 504000
456800

ve Interest Rate 5.71%

Investment

1-Sep
1-Feb
on in months 5
er of contracts 60

l buy call options

nterest rate goes down to 4.5%

1-Feb 1-Sep 30-Sep

94.9 95.5 x
94.5 95.45 x
0.4 0.05 0
 94.75
95.45
Yes
n options 52500
22350
315000
345150

ve Interest Rate 4.60%

nd buy later
June 2024 Webinar handout Question #1

c)
NPP NH Combined
EPS 460 620 460
Number of shares 22000000 5000000 32000000
P/E Ratio 10 5 10
Total Earnings 10120000000 3100000000 14720000000

Total Shares in new company 32000000

Number of newly issued shares 10000000
Therefore the share-for-share ratio is 2 shares in NPP for every share in NH

d)
NPP NH (in m)
Pre-acquisition value 101200 15500
Post-acquisition value 101200 46000
GAIN 0 30500
share in NH
June 2024 Webinar handout Question #2

Calculation of WACC - SD WN 1: Gearing Ratios

Super-market Industry
MV of Equity
Equity beta 1.25 MV of Debt
Asset beta 0.96 Debt%
Equity%
Regearing it to SD's equity beta
WN 2: Pre-tax Cost of
Equity beta of SD 1.53 SD
Years
Cost of equity (ke) 18.17% 0
1
WACC of SD 12.57% 2
3
Calculation of WACC - HD 4
5
Hotel Industry 6
7
Equity beta 0.90 8
Asset beta 0.77 9
10
Regearing it to SD's equity beta
IRR
Equity beta of SD 1.22

Cost of equity (ke) 16%

WACC of SD 11.56%

Free-Cash Flows

Years SD Cash FlowsHD Cash Flows

1 33.2 25.6
2 33.2 25.6
3 33.2 25.6
4 33.2 25.6
5 33.2 25.6
6 39.8 32
7 39.8 32
 8 39.8 32
9 39.8 32
10 39.8 32

PV of cash Flows 196.23 160.77

Less: One-time cost -12.00 -8.00
Net Present Value 184.23 152.77

Financial Viability

Post-demerger values of divisions 337.00

Less: Value of Debt -126.5
Post-demerger Value of equity 210.50
Pre-demerger value -150
Gain to shareholders 60.50

The demerger is viable.

1: Gearing Ratios

SD HD
90 60
75.9 50.6
45.75 45.75
54.25 54.25

2: Pre-tax Cost of debt

-110
10
10
10
10
10
10
10
10
10
110

8.48%
June 2019 Question #1

Uwa Project
Project duration 4 years

Jigu Project
Project duration 5 years after Uwa project

b) i) NPV of Uwa Project before considering offers

Years 0 1 2 3
Sales Revenue 5160000 24883200 49828608
Variable costs (2064000) (9584640) (18482381)
Fixed Costs (2700000) (2970000) (3267000)
Training costs (4128000) (5750784) (1848238)
TAD (5250000) (5250000) (5250000)
Profit/Loss before Tax (8982000) 1327776 20980989
Tax @ 20% 1796400 (265555) (4196198)
Profit/Loss After Tax (7185600) 1062221 16784791
TAD 5250000 5250000 5250000
Purchase and sale (35000000)
Working Capital (1032000) (1972320) (2494541) 1143259
Cash Flows (36032000) (3907920) 3817680 23178050

NPV (22046)

ii)
Asset value is the present value of CFs related to the project.
60000000+10000000 = 70000000
PV 46111168.19
(rounded off to the nearest 100,000)

Honua Co. offer

standard deviation 30%

r 2.30%
t 2
Pve 30000000
Pva 36432088

Using BSOP calculator,

put option value 2409899

Estimated total value of Jigu project after offer 17668298

 4 Working #1: TAD
38396022
(13714342) Y0 35000000
(3593700) Y0-Y1 -5250000
(1371434) Y1 29750000
(12250000) Y1-Y2 -5250000
7466546 Y2 24500000
(1493309) Y2-Y3 -5250000
5973237 Y3 19250000
12250000 Y3-Y4 -12250000
7000000 Y4 7000000
4355602
29578839 Working #2: Working Capital

Years 0 1
Working Capital Required 1032000 1972320
 2 3 4
2494540.8 -1143258.62
Receipt Amt 357000000
Date of receipt 1-May

#1: Forward contract

Forward rate 85.00
Net receipt with forward rate 4200098

#2: Options

We will buy call option

Receipt from options 4250000
Premium payable in LL 17000000
Premium payable in $ 202381
Interest on borrowing premium 3642.86

Net receipt 4043976

Amount in $ 4200000
Investment date 1-May
Duration in months 5
USA base rate 3.30%
Number of contracts 14

We are worried about interest rates decreasing, future prices will increase, we will buy now an

If the interest rate increases by 0.5% If the interest rate dec

1-Jan 1-May 30-Jun

IR 96.7 96.2 x IR
FP 96.1 96 x FP
Basis 0.6 0.2 0 Basis

We will buy at 96.1 We will buy at

We will sell at 96 We will sell at

Loss on futures 1750 Gain on futures

Interest on Investment 61250 Interest on Investment
Net receipt 59500 Net receipt
se, we will buy now and sell later

e interest rate decreases by 0.5%

1-Jan 1-May 30-Jun

96.7 97.2 x
96.1 97 x
0.6 0.2 0

will buy at 96.1

will sell at 97

on futures 15750
est on Investment 43750
59500
Todays date 1-Dec
Borrowing 18000000
Start date 1-Feb
Duration 7

#1: Options on futures

Number of contracts 42
Contract size 1000000

If interest rate increases by 0.5% If interest rate decre

Basis on 1 Feb 0.22 Basis
Interest Rate 95.7 Interest rate
Future price 95.48 Future price

Buy put option

Exercise price 95.5 96 Exercise price
Future price 95.48 95.48 Future price
Yes Yes
Gain on options 2100 54600 Premium
Premium 69510 94710 Interest
Interest 493500 493500 Net payment
Net payment 560910 533610
Effective interest rate 5.34% 5.08% Effective interest rate

#2: Swap

Keshi Co. Counterparty

L+0.4 4.6 L+5
5.5 L+0.3 L+5.8
(0.8 saving)

L+0.4 4.6
(L) L Benefit to keshi
4.54 -4.54 Benefit to cp

4.94 L+0.06

Effective Interest rate after bank charge 5.04%

terest rate decreases by 0.5%
0.22
96.7
96.48

cise price 95.5 96

96.48 96.48
No No
69510 94710
388500 388500
payment 458010 483210

ctive interest rate 4.36% 4.60%

0.56
0.24
June 2013 Question #3

Kenduri has to pay Lakama 4.5

Lakama has to pay Kenduri 2.1
Net payable for Kenduri Co. 2.4 $m to be paid

Forward
Amt. of pounds required to pay in 3 months 1500375.09

Options
Put options or call options?
Put option if you want the option to sell contract currency
Call option if you want the option to buy contract currency

Exercise price $1.6/ pound pounds

2400000 / 1.6 (exercise pri 1500000
Number of contracts 24 If contract size is already in

Premium in dollars 31200

Premium in pounds 19575.86

Total cost 1519575.86

Exercise price $1.62/ pound

1481481.48 pounds
Number of contracts 23.7037037 23

Premium in dollars 49162.5

Premium in pounds 30846.09 1437500
Unhedged amt in $ 71250
Unhedged amt in pounds 44542.3856

Total cost 1512888.48

Money Market Hedge

Payment is in 3 months time in USD

We will invest sufficient USD today so that with interest income, after 3 months you will have
2381543.04
1. Convert pounds to USD today
 1494255 s=p(1+rt)
2. Borrow 1494255 pounds at 4% p=s/(1+rt)
1509197

Forwards 1500375
Money Market Hedge 1509197
Options 1.6 1519576
1.62 1512888

Multilateral Netting
All amounts in m pounds)
Owed TO Kenduri Co. Gochiso Co. Jaia Co. Lakama Co.
Owed BY
Kenduri Co. 0.70 2.82
Gochiso Co. 2.04 0.88
Jaia Co. 2.17 0.94
Lakama Co. 1.32 2.41
Total 3.48 2.41 2.74 4.64
Less: Amt Owed -3.52 -2.92 -3.11 -3.73
Net Payable/Receivable -0.04 -0.51 -0.37 0.91

Kenduri Co. will pay Lakama Co. 39734.04

Gochiso Co. will pay Lakama Co. 505413.37
Jaia Co. will pay Lakama Co. 367190.46
Lakama will receive in total 912337.87
ntract size is already in dollars, just divide the hedge amount with the contract size directly.

months you will have the amount you actually need

 Exchange Rates
mounts in m pounds) US$/Pound 1.595
Total CAD/Pound 1.57
JPY/Pound 132.75
3.52
2.92
3.11
3.73
ize directly.
June 2012 Question #4

a) Cost of Capital

Elfu Co.

beta equity 1.4

obe 1.25 (other activities beta equity)
Number of shares 400000000
Market price 1.2
Market value of equity 480000000
Market value of debt 96000000
MV of debt (other activities 76800000 80%
MV of equity (other activiti 360000000 75%
Vd + Ve 576000000
Asset beta 1.22
oba 1.08
MV of cp equity 120000000
cba 1.64 Asset beta = (oba * MV of oa + cba * MV
we need to find cba, cba = ((Asset beta
Tisa Co.

Number of shares 10000000

Market price 1.8
Value of debt 3600000
After-tax cost of debt 4.50%
Market Value of equity 18000000
equity beta 1.88
cost of equity 14.42%

WACC 12.76%

b)Process Omega

Years Cash Flows

0 -3800
1 1220
2 1153
3 1386
4 3829

IRR 27.30%
MIRR 22.68% (values, finance rate, reinvestment rate)

Note: The finance rate and reinvestment rate are same unless explicitly mentioned

Process Zeta
(given in Q)
IRR 26.60%
MIRR 23.30%

Process Omega has a higher IRR, but MIRR is a better way of calculating interal rate of return

c) Value at Risk

Confidence level 99%

Using standard distribution table,
z value 2.33 (0.99-0.5) = 0.49 (find the closest value to 0.49 on th
VAR formula = k*standard deviation*No.of years^(1/2) (No.of years^1/2 is basical
Annual VAR 1864000
5-year VAR 4168030.71
 * MV of oa + cba * MV of cp)/(MV of oa + MV of cp)
ba, cba = ((Asset beta * total equity) - oba * equity )/ecb
explicitly mentioned in the Q that it is reinvested at a different rate

g interal rate of return, therefore, since Process Zeta has a higher MIRR, we will choose Process Zeta.

est value to 0.49 on the table)

of years^1/2 is basically square root of number of years)
choose Process Zeta.
June 2011 Question #3

Bond #1 Bond #2 What is gross redemptio

Ans: Kd/IRR
Par value 1000 1000
Coupon rate 6% 4%
MV of bond 1079.68 991.14
IRR/ Cost of debt ? 4.20%

Bond #1

Year
0 -1079.68
1 60
2 60
3 60
4 60
5 1060
IRR 4.20%

Macaulay duration

Years 1 2 3 4 5
Weighted Avg 57.5815197 110.521047 159.099246 203.581697 4314.54725

Macaulay duration 4.49

Bond #2

Year
0
1 40
2 40
3 40
4 40
5 1040
Market Price 991.14

Macaulay duration

Years 1 2 3 4 5
Weighted Avg 38.3876798 73.6806979 106.066164 135.721131 4233.1407
Macaulay duration 4.63
t is gross redemption yield? Or yield to maturity?

Total
4845.3308

Total
4586.9964