MyCIMA

Queries relating to F3

Posted: Monday 05 April 2010 by PM
Replies : 12

Hi,

    I am working full time & also studying on my own with CIMA Texts whenever I get time. After going through past papers of F3, I have encountered some minor doubts inspite of getting the entire problem. Due to these minor doubts, I don't get the satisfaction of solving entire problem.

   Can anyone tell me whether these doubts be solved if I put it on Cimasphere & also tell me where (section) I can put them.

Thanks & Regards,

P.M 

 

 

Tuition Support

Posted by Beth on Thursday 08 April 2010 15:51

Hi PM,

I am sorry to hear that you are struggling with some of the text you have been studying.

CIMAsphere is helpful for posting particular enquiries for advice, however as students are not tutors, they may not be able to give you the correct response.

You have posted your question in the correct section of the website, but you would need to specify what problems you are encountering for assistance.

Although you study part-time, if you opt into a Distance Learning programme, you would have access to a Tutor which would probably be in your best interests.

I hope this helps

Beth

CIMAsphere Moderator

some past paper related queries F3

Posted by PM on Monday 19 April 2010 10:41

Hi,

    Please solve the doubts if anyone has solved the respective past papers of P9 ie F3:

May 2006:-

Q2. ii Calculation of short & long term financing (Alternative approach)

Q3. Why in YTM calculations 6% & 7% is taken, why it was not 6% & 8%

Specimen paper:-

Q2. Alternative 2 ie using finance lease

#why to use cost of leased asset as 18m & not 25m since reason given is that the 1st lease payment is made in advance & should b deducted from the cost [25-7=18]

#for allocation of implicit interest: acturial method how 8% = annuity factor 2.577, will annuity table b provided in exams

# what things w should keep in mind at the time of Finance & Operating lease calculations

Nov 2009:-

Q3.(a) ii suggested answer doesn't have the merits & demerits of each alternative source of finance instead key issues are raised so whats expected here

Q3.(a) i for alternative 2, its given as calculation of cash flow of tax relief ie 2 to 10yrs ie 0.14m & even not got its working

# what is the formula of YTM as used differently in both alternative 2 & 3

# what r tax depn  allowances & tax relief & how & why they r calculated(general)

Q2. ii In revised gearing, why the surplus cash of 7million is deducted from Equity ie 70& why original debt kept as it is

Q1. (b) section 2:- how additional 40 million shares by T

Thanks & Regards,

P.M

 

F3 Queries

Posted by PM on Wednesday 28 April 2010 05:45

Hi,

    Is there anyone to help me with these queries or till now no one has solved all these past papers of P9 ie F3 that I hv mentioned? Since May is approaching so before that If I could get a help then its really worth for me & appreaciating.

Thanks in advance,

P.M

Hope this helps

Posted by Krissy on Thursday 29 April 2010 01:23

PM asks: 

Please solve the doubts if anyone has solved the respective past papers of P9 ie F3:

May 2006:-

Q2. ii Calculation of short & long term financing (Alternative approach)

Q3. Why in YTM calculations 6% & 7% is taken, why it was not 6% & 8%

 Re Q2:  Is that MNO May 2006 - Financing of Working Capital?  The two approaches are 'aggressive' and 'conservative' - the aggressive approach uses short-term finance to cover some or all current working capital - and possibly even some fixed costs, wheareas the latter will tend to use s/t finance for s/term costs only (eg a bank overdraft) and take out long-term loans for long term receivables, payables and inventory.

Re: Q3: I presume you are referring to May2006 EFG?  The 6% and 8% to calculate cost of debt was chosen purely at random to calculate IRR - which is always aproximate anyway.  The person who prepared the answer probably judged that these were the best DF's to use - most students are advised to try 5% and 10% (to get one minus NPV and one +ve).  It relates to a redemption on an unsecured bond at 7% per annum.

 

quote:

Specimen paper:-

Q2. Alternative 2 ie using finance lease

#why to use cost of leased asset as 18m & not 25m since reason given is that the 1st lease payment is made in advance & should b deducted from the cost [25-7=18]

#for allocation of implicit interest: acturial method how 8% = annuity factor 2.577, will annuity table b provided in exams

# what things w should keep in mind at the time of Finance & Operating lease calculations

I think the examiner here has included interest on lease payments as a taxable allowance - don't worry about it as a question on a specimen paper is not likely to come up (I have been told).  If the first lease payment is in advance, very often the tax is in arrears, so whilst the payment is in the current year, the tax is deferred until 2 x Years later (T2) - it will say in the question.

Recommend the cheapest per NPV.  Annutiy tables will be provided in exams and you can find the Annuity Factors int he Cum Present Value tables or calculate it from the formula given at the top of the page if it is unusual (i.e., over 20% or has decimal points, e.g., DF: 4.88%)

Operating vs Financing - one has risks and rewards of ownership and goes on the balance sheet - Statement of Financial Position - as an NCL, the other is written off annually to the Income Statement (operating) and has no risks or rewards of ownership, which remains with the lessor (the person who rents it to you).  You need to think about maintenance costs.

 quote:

Nov 2009:-

Q3.(a) ii suggested answer doesn't have the merits & demerits of each alternative source of finance instead key issues are raised so whats expected here

Q3.(a) i for alternative 2, its given as calculation of cash flow of tax relief ie 2 to 10yrs ie 0.14m & even not got its working

# what is the formula of YTM as used differently in both alternative 2 & 3

# what r tax depn  allowances & tax relief & how & why they r calculated(general)

Q2. ii In revised gearing, why the surplus cash of 7million is deducted from Equity ie 70& why original debt kept as it is

Q1. (b) section 2:- how additional 40 million shares by T

 Not sure which Question this is but I expect it says 2- 10 years x AF 2-10 years because the CF remains constant for each year.  The formula has probably been adjusted for tax (x.70?).  Tax Depn allowance are ussually 25% reducing balance (Capital Allowance allowable on Plant & Equipment [machinery] and company cars) and then x.30 (CT rate) of the aforementioned CA as the tax saving.

Q2 - not sure which question this is - are you sure it is 7million surplus cash deducted and not .70 tax from the Debt.  It is common to get Debt and Equity the wrong way round in the formula Equity comes first.  There is no tax deduction from Equity, but there is from debt (in Modigliani & Miller theory questions).

Q1 - not sure whcih question this is - additional 40 million shares could be a share merger (acquisition), it coudl be the NPV of an accepted project added on, to calculate new value of shares or it could be some kind of a rights issue or scrip issue, so has to be factored in as some kind of share dilution, that decreases the value per share. 

Some doubts

Posted by PM on Monday 10 May 2010 09:36

Nov 2008:-

Q2(b) Calculation of APV part on Pg 31 of solution

Q4 Spot rate E$ to euro=1.43

      weakens by 3% evenly=1.43*1.015 how 1.015 & not 3%

      In Calculation of Operating Cycle, the calculation of Days credit given to customers.

Q1(d) why 3315 is +ve in appendix A as it is tax deducted so it should b -ve

   In sales receipt why 80% is taken

(a)why 20% is taken in sales receipt

May2008:-

Q3 for method 1 how tax depr is 40000 ie how its calculated & time lag means in arrears

Q1(c) (i) how 30% compound return is calculated

May 2009:-

Q2 how double turnover amount is caculated

 

    Quick help in this regards would be appreciating & thanks in advance.

 

Thanks & regards,

P.M

Help needed

Posted by PM on Tuesday 11 May 2010 12:15

Hi,

   Can anyone provide solutions for above queries as it can help me for the exams atleast by end of this week?

 

Thanks & Regards,

P.M

   

www.strategyaide.co.uk

Posted by Dominic Lavelle on Wednesday 12 May 2010 22:53

Hi pm

I am not sure of the solution to be honest, but there are some users here that may be able to help... some are helping out from the Topcima forum...

http://www.cimacase.ismyforum.co.uk/amicstrat/index.php

April 2010 Edition - FM - F3 Study notes

Posted by KCSM on Tuesday 18 May 2010 15:45

Has anyone been able to locate the April Edition of the Finanical Management Magazine? The model answer in the Velocity magazine -April 2010 refers to the study notes in this magazine but there is no link to the magazine on the CIMA site :<

Appreciate if anyone can locate and send the link. Thanks.

 

K 

 

Link to F3 article in April's FM Study Notes

Posted by Jackie Durham on Wednesday 19 May 2010 09:07

Hi Karen

 

Here is the link to the F3 article which appeared in April's Study Notes. You will  find Study Notes articles in the resources section for each individual paper in the 2010 syllabus area of the website.

http://www.cimaglobal.com/Documents/Student%20docs/2010%20syllabus%20docs/F3/performance%20analysis.pdf

Good luck with your exams

Jackie Durham

CIMAsphere Moderator

April FM article F3

Posted by Trushar Patel on Wednesday 19 May 2010 10:14

 

The F3 article on company performace includes a question for students in which you have to review the performance (Fink).

The answer was to be included in next issue of Velocity ie May 2010 but I can not find the answer plan. Please advise.

 

Thanks

Trushar

F3 QUERY- ABC(NOV 07 EXAM)

Posted by Scott Angus on Sunday 23 May 2010 14:55

Hi

 

I have a query on the Kd calculation for Director B's:Project Specific Cost of Capital- For Director A proposal we work out the IRR as it's redeemable debt, which I understand. but when we get to work out the Kd for Director B's proposal the 5.6% is worked out by using the kd(1-t) formula ie 8%(1-0.30), but this 260m debt they are planning to raise to fund the 600m investment is also redeemable, so why don't we use the IRR formula again?

 

Is it because we are using XYZ's info, and their Debt is made up of a bank loan, and the kd(1-t) is the relevant formula to use then?

 

Thanks

F3 Exam Formula- Betas

Posted by Scott Angus on Sunday 23 May 2010 15:02

Hi

 

In the exam formula i see we get the formula for to work out the Ungeared Beta, but nothing for the Geared Beta(which is easy to work out from the ungeared formula).

 

Does anyone know if we are still only going to receive the Ungeared Beta in the May 10 exam, or will we receive both? The reason for my question is, i sat the Online QBR exams with FTC, and they supplied the Regear Formula, but wasn't sure if it was going to be the case in the real exam?

 

Thanks