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CAP 2 SFMA ASSESSMENT 2010

  • 18-12-2009 12:01am
    #1
    Registered Users Posts: 8 ✭✭✭ wannabe_auditor


    well guys let the fun begin! please use this space to share any ideas you may have on this years assessment. Get any help you can from managers and buddies and maybe even your own grey matter, I know the intake in my firm are planning to meet on Monday and bash out some ideas, I'll post those here.
    good luck!


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Comments

  • Registered Users Posts: 120 ✭✭ Coldplayer


    Yeah cheers for setting this up, they did it last year and it worked well. I'll post ideas up as i get them


  • Closed Accounts Posts: 5 ✭✭✭ Buddy the Elf


    Hoping this service will be of good value to everyone, could be a great asset in preparing for the assessment.
    Few brainstorming ideas here on topics i think are likely to come up and would be beneficial to have prepared, let me know if you are thinking on the same lines or if theres anything i may have missed out

    WACC
    Ratio Analysis - not sure as theres only one years p&l and b/s
    Acquisitions/Mergers
    Due Diligence
    Foreign Currency Transactions
    Variance Analysis
    Decision Making - product development proposal
    Dividend Policy
    Sources of Finance
    Stock Market

    I also think theres a chance it could be required in report format recommending whether to choose geographic market development or product development


  • Registered Users Posts: 120 ✭✭ Coldplayer


    Yeah i was thinking along those lines too.

    I so think ratio analysis will be required even if there is only one set of financials to work with.

    Dividend Policy would appear to be a stand out aswell.

    The product development section reminds me an awful lot of the questions in the pack on Decision making in CAP1 Mgmt.


  • Registered Users Posts: 274 ✭✭ eoin99


    Hoping this service will be of good value to everyone, could be a great asset in preparing for the assessment.
    Few brainstorming ideas here on topics i think are likely to come up and would be beneficial to have prepared, let me know if you are thinking on the same lines or if theres anything i may have missed out

    WACC
    Ratio Analysis - not sure as theres only one years p&l and b/s
    Acquisitions/Mergers
    Due Diligence
    Foreign Currency Transactions
    Variance Analysis
    Decision Making - product development proposal
    Dividend Policy
    Sources of Finance
    Stock Market

    I also think theres a chance it could be required in report format recommending whether to choose geographic market development or product development

    Had a read through the assignment and this seems like a good list, pretty much all the major points I had picked out too.

    It might also be worth preparing Company Valuations & the different methods used - Asset based, div based etc...probably the only thing I noticed that isn't on your list.

    Not too sure on the ratio analysis, as there is only one years figures. Last years assessment required a detailed ratio analysis, but there was 2 years figures provided & some benchmarks to compare results with. No harm having it prepared anyway though.


  • Registered Users Posts: 2,734 Newaglish


    If someone could upload a copy of the assignment and the date it's going to be sat on, a few of us here could probably lend a hand!


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  • Registered Users Posts: 274 ✭✭ eoin99


    Newaglish wrote: »
    If someone could upload a copy of the assignment and the date it's going to be sat on, a few of us here could probably lend a hand!

    Here ya go!


  • Closed Accounts Posts: 44 ✭✭✭ MAX72


    Hi Guys,

    A lot of the stuff you have listed looks good. I am working in industry so I do not have any other students to work with.

    Are there any groups working together in Kildare or near Dublin?

    I have done some workings on the WACC and the decision to make the product. i would like to have some one look over these.

    If anyone needs another person in their group, let me know.


  • Registered Users Posts: 120 ✭✭ Coldplayer


    I'm the same as yourself so if you want to pm me your email address we could cross check each others workings?


  • Registered Users Posts: 120 ✭✭ Coldplayer


    or even just throw them up here and let everyone check them.

    Anyone got last years finance notes for CAP1?


  • Closed Accounts Posts: 49 ✭✭✭ rums08


    Hi all,
    I am new to the forum and would like to know if there are any group studies re SFMA assessment...so that I can cross check my workings with some of you...
    Any help would be deely appreciated.

    Thanks


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  • Registered Users Posts: 8 ✭✭✭ wannabe_auditor


    Hey guys glad to see the ball is rolling, the list above is quite comprehensive, areas that I think call for the most interest are:

    Investment appraisal - theres 2 potential projects China and France.
    The Chinnesse investment has a lot of non financial info in it and perhaps this is where risk management and strategic thinking come into play (Eg: have a month to decide whether to acquire Rain Inc and also the fx risks:..Translation,Transaction,Economic )
    The French investment is quite a number cruncher, I haven't done management accounting in two years so I aint sure what there are going for here. Are we to just reassess that report with costs that will actually be incurred if the inv goes ahead?

    COC & WACC: I think its def going to be a question, perhaps what is the current WACC under the exsisting capital structure and what will change to under the three options


    Anyways that all for now, keep the ideas coming in, hope you all have a nice Christmas!


  • Registered Users Posts: 8 ✭✭✭ wannabe_auditor


    I also think theres a chance it could be required in report format recommending whether to choose geographic market development or product development


    Isn't the French option only a €300,000 investment compared to the €300,000,000 there going to try and raise. I think their going to do both and that one assess strat and non financial aspects and the other is going to be a number cruncher


  • Registered Users Posts: 17 ✭✭✭ Archer26


    Hey All,

    Glad to have somewhere to bounce ideas around, has anyone started working on the WACC calculation??

    I got a WACC of 15.62%, can anyone confirm if they think I'm anywhere close to correct?? I got stuck a fair few times! :confused:

    Thanks!


  • Registered Users Posts: 8 ✭✭✭ wannabe_auditor


    hey all jus finished the wacc, i got a figure of 14.51%

    my costs of capital where as follows:
    ordinary share capital:18.7%
    pref shares: 5%
    Irredeemable Debentures: 1.6%
    Redeemable Debentures: 9.87%

    not entirely sure if mine is correct esp on the pref shares and the Irredeemable D's. let me know what you all think


  • Closed Accounts Posts: 3 SFMA


    I got 15.8% as my WACC

    Ke=18.7%
    Kp= 5% (wasn't too sure to put in market value ex/cum div for the preference shares but thought it made more sense to put in ex-div)
    K(irr deb)= 7.2%
    K(red deb)= 11.79%

    I've also done the relevant costing for the special order (Lesbleu) as the workings were wrong and have accepted the order for the teeth whitening equipment, they have used historical prices and haven't included opportunity costs/gains in their calculations to come to the expected loss on the project. Wasn't too sure about the unskilled labour though as the question says "labour will be removed from another contract, which cannot otherwise be delayed" the wording isn't great, and if it has to be stopped do we not need the contribution foregone on the stopped project for our calculations? I reckon there will be a non-financial consideration question for that part too.


  • Closed Accounts Posts: 11 ✭✭✭ flashtash


    I got 12.52% for WACC

    Ord. Shares: 16.14% (did you guys use 4 or 5 periods to calculate the dividend growth?)

    Pref Shares: 5%
    Irred Debentures: 8%
    Redeem Debentures: 11.95%

    It was last may since I did one of these so I may be a bit rusty


  • Closed Accounts Posts: 11 ✭✭✭ Masjanja


    Hey! Did anyone got the profit for relevant costing bit? Also, kind of confused with the first Material CX , is it the 10,000 selling price, or it is an actual cost those guys will have to pay to scrap the material?
    :confused:


  • Registered Users Posts: 8 ✭✭✭ wannabe_auditor


    seems like my Irredeemable rate of 1.6 was too good to be true! I was putting 8% in for i, as opposed to using the 40 (value of 8%)

    are we too use the value cum interest or ex interest
    thats what makes them 7.2% (Cum Interest) and 8% (Ex Interest)

    I would be of the opinion that the calculation should be based on the current market price less the interest due to be paid (i.e the 400)


  • Registered Users Posts: 120 ✭✭ Coldplayer


    Hey guys i was exempt from finance last year, for this assessment are you all using the formula from the Anne Marie Ward Text???


  • Closed Accounts Posts: 3 SFMA


    I'm pretty sure that the irredeemable debt calculations are to be all ex interest making it 8%!


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  • Closed Accounts Posts: 11 ✭✭✭ Masjanja


    I've also done the relevant costing for the special order (Lesbleu) as the workings were wrong and have accepted the order for the teeth whitening equipment, they have used historical prices and haven't included opportunity costs/gains in their calculations to come to the expected loss on the project. Wasn't too sure about the unskilled labour though as the question says "labour will be removed from another contract, which cannot otherwise be delayed" the wording isn't great, and if it has to be stopped do we not need the contribution foregone on the stopped project for our calculations? I reckon there will be a non-financial consideration question for that part too.

    [/QUOTE]
    Please, would you mind telling me how did u interpret the first note on materials, is 10, 000 is a cost for F Plc or it is income from disposal of materials. By the way, consideration for labour hours is given in the question 150 per lab. hr


  • Closed Accounts Posts: 3 SFMA


    The cost materials of CX is an opportunity gain which is a positive figure in your calculations, they are saving money by not having to pay the costs of disposal.. No that €150 is the contribution for this contract we need the contribution foregone..


  • Closed Accounts Posts: 11 ✭✭✭ flashtash


    SFMA wrote: »
    I'm pretty sure that the irredeemable debt calculations are to be all ex interest making it 8%!

    thats what I did too. here are my calcs (briefly!)

    Ke=(0.25(1+.1199)/4.20)+0.1199
    = 18.65%

    Kp=0.3/6
    =5%

    Kd=8(1-.2)/80
    =8%

    Redeem Deb:
    NPV5% NPV10%
    IRR Y0 97 97
    Y1+2 (13-2.6) 1.859 (19.33) 1.736 (18.05)
    Y2 (100) 0.907 (90.7) 0.826 (82.6)

    Totals: -13.03 -3.65


    IRR= 0.05 + (-13.03(0.05))/(-13.03+3.65)
    =11.95%


    WACC MV % Cost Total
    Issued 1000mill 52% 18.65% 9.698
    Pref 200 mill 10% 5% 0.5
    Irred 440 mill 23 8% 1.84
    Redeem 290 mill 15 11.95 % 1.79

    WACC=13.828

    Anyone else agree/disagree?


  • Closed Accounts Posts: 11 ✭✭✭ flashtash


    sorry,tried to edit this so it would make sense, but you might ba able to make out what im getting at


  • Closed Accounts Posts: 11 ✭✭✭ Masjanja


    SFMA wrote: »
    The cost materials of CX is an opportunity gain which is a positive figure in your calculations, they are saving money by not having to pay the costs of disposal.. No that €150 is the contribution for this contract we need the contribution foregone..

    Cheers:)


  • Closed Accounts Posts: 99 ✭✭✭ jhn_noln


    i may be a it rusty at this kind of craic but flashtash shouldn't you use the market value for you equities aswell instead of book value?


  • Closed Accounts Posts: 11 ✭✭✭ Masjanja


    What is wrong with these guys, the wording is pretty vague overall. Why there is no indication of whether labor used for French project is full time employees, anyway does anyone have an idea whether to treat labor costs as incremental or committed?


  • Closed Accounts Posts: 11 ✭✭✭ Masjanja


    Hey, dont know if anyone at this point yet, so if I treat both skilled and unskilled labor costs including foregone contribution as incremental, I again arrive at loss of 28,000, which I dont think make sense for the purpose of the question. If I take labor costs as committed, i.e they had been guaranteed salary anyways, then i break-even. So anyone else got any suggestions? Please let know!


  • Closed Accounts Posts: 11 ✭✭✭ flashtash


    jhn_noln wrote: »
    i may be a it rusty at this kind of craic but flashtash shouldn't you use the market value for you equities aswell instead of book value?

    to be honest, i'm not sure. I have to do a bit of research on last years notes still, so apologies for any errors.


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  • Registered Users Posts: 149 ✭✭ Rickyroma


    Coldplayer wrote: »
    Hey guys i was exempt from finance last year, for this assessment are you all using the formula from the Anne Marie Ward Text???

    Yep - we were told that while different texts will use different definitions (esp. re ratios) we should always look on Ward as definitive.


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