CAP 2 SFMA ASSESSMENT 2010

BlackHouse · 04-01-2010 3:55pm

I got the following:

Material CX = +10,000
Material FG = -25,000 Replacement cost agreed
Material NF = -170,000 Replacement cost agreed
Skilled Labout = 0 As it is idle if project does not go ahead agreed
Unskilled Labour = 76,000 (400*40 + 400*150) agreed
Variable O/H's 12,000 Relevant as they are incremental agreed
Fixed OH's = 18,000 stepped cost agreed
Estimation costs = 0 Sunk cost agreed
Engineering fees = 25,000 agreed
Head Office = 0[/quote] agreed

You have the 10k in the wrong way around, loos shoul dbe 16k not 36k.

BlackHouse · 04-01-2010 3:57pm

accounts10 wrote: »

i have just been working on the relevant costing section.. just wondering did anyone get a loss of 16,000?

I got that, have posted my workings.

MAX72 · 04-01-2010 4:06pm

BlackHouse wrote: »

I got the following:

Material CX = +10,000
Material FG = -25,000 Replacement cost agreed
Material NF = -170,000 Replacement cost agreed
Skilled Labout = 0 As it is idle if project does not go ahead agreed
Unskilled Labour = 76,000 (400*40 + 400*150) agreed
Variable O/H's 12,000 Relevant as they are incremental agreed
Fixed OH's = 18,000 stepped cost agreed
Estimation costs = 0 Sunk cost agreed
Engineering fees = 25,000 agreed
Head Office = 0

agreed

You have the 10k in the wrong way around, loos shoul dbe 16k not 36k.[/quote]

The only one I have a question mark on is the unskilled labour. I agree with the opportunity cost of €60k but would you still charge the cost of the unskilled labour. If the project does not go ahead, will that cost not be incurred by the other project. Just like the skilled labour, the unskilled labour cost will be incurred whether this project goes ahead or not. I am at a break even situation!!

BlackHouse · 04-01-2010 4:37pm

MAX72 wrote: »

agreed

You have the 10k in the wrong way around, loos shoul dbe 16k not 36k.

The only one I have a question mark on is the unskilled labour. I agree with the opportunity cost of €60k but would you still charge the cost of the unskilled labour. If the project does not go ahead, will that cost not be incurred by the other project. Just like the skilled labour, the unskilled labour cost will be incurred whether this project goes ahead or not. I am at a break even situation!![/quote]

So you are saying that unskilled of €40 per hour would be used for the other job if we don't go ahead, therefore is a cost that the company will incurr anway?
so its only the contribution forgone of 150 per hour that needs to be included???

MAX72 · 04-01-2010 5:17pm

BlackHouse wrote: »

The only one I have a question mark on is the unskilled labour. I agree with the opportunity cost of €60k but would you still charge the cost of the unskilled labour. If the project does not go ahead, will that cost not be incurred by the other project. Just like the skilled labour, the unskilled labour cost will be incurred whether this project goes ahead or not. I am at a break even situation!!

So you are saying that unskilled of €40 per hour would be used for the other job if we don't go ahead, therefore is a cost that the company will incurr anway?
so its only the contribution forgone of 150 per hour that needs to be included???[/quote]

Thats how I was reading it but now I am not so sure!!..... everyone here seems to be including the €16k unskilled labour cost. Will have to check it out before the 16th!!

Will Mckenzie · 04-01-2010 5:52pm

susie-q wrote: »

Looking back on my college notes I have relevant cost of materials will be the greater of alternative use value or the net realisable value. So for the case of FG would this not be the greater of scrap value €1 and replacement value €5.?
i.e. 5000 kg x €5 = €25000??

Is the replacement cost not gone already? They could be trying to catch us out with wording?

Will Mckenzie · 04-01-2010 6:04pm

MAX72 wrote: »

So you are saying that unskilled of €40 per hour would be used for the other job if we don't go ahead, therefore is a cost that the company will incurr anway?
so its only the contribution forgone of 150 per hour that needs to be included???

Thats how I was reading it but now I am not so sure!!..... everyone here seems to be including the €16k unskilled labour cost. Will have to check it out before the 16th!![/quote]

I think it is only the 150 per hour needed. The 40 per hour would be used anyway. Thats how I read it anyway.

This would mean unskilled labour is 60,000

accounts10 · 04-01-2010 6:33pm

MAX72 wrote: »

So you are saying that unskilled of €40 per hour would be used for the other job if we don't go ahead, therefore is a cost that the company will incurr anway?
so its only the contribution forgone of 150 per hour that needs to be included???

Thats how I was reading it but now I am not so sure!!..... everyone here seems to be including the €16k unskilled labour cost. Will have to check it out before the 16th!![/quote]

Yeah i was unsure about including the unskilled labour as well. i had originally only included the contribution forgone. but then saw everyone here saying they were including it.
also, i wasnt sure about the variable overhead cost. would you include the variable overhead element for skilled labour (200 hrs x 20) as they have idle time so would it not be incurred regardless of whether you take on the job or not??

flashtash · 04-01-2010 9:07pm

MAX72 wrote: »

The debentures raise the exact amount. They raise 600million but would have to pay off the outstanding 300 million. The rights issue raises 336 million.

yeah, i agree with that

MAX72 · 05-01-2010 10:34am

MAX72 wrote: »

So you are saying that unskilled of €40 per hour would be used for the other job if we don't go ahead, therefore is a cost that the company will incurr anway?
so its only the contribution forgone of 150 per hour that needs to be included???

Thats how I was reading it but now I am not so sure!!..... everyone here seems to be including the €16k unskilled labour cost. Will have to check it out before the 16th!![/quote]

Checked this out last night. The €16k labour charge is also included giving a cost of €76k. Overall loss of €16k.

eomahoney2000 · 05-01-2010 10:46am

ava 10 wrote: »

got pretty much the same answer for wacc on debentures..just a bit confused tho with the year zero if its 2009 or 2010 and the market value of debentures nt sure if its 100 r has interest 2be subtracted etc..

I was just wonderin wat is the purpose of calculating wacc for each of these three situations... I mite sound stupid askin as i do not understand how ye know if they raise the necessary 300 mill required

Mark McDermott · 05-01-2010 11:39am

OMG GUYS, THIS SFMA ASSESSMENT IS LIKE SOOOO STRESSFULL!!!:eek::eek::eek:

I've spent my entire Christmas Holidays trying to work out the alternative WACC calculations for the 3 sources of finance so I hope they're correct;

Scenario 1: 14.28%
Scenario 2: 15.23%
Scenario 3: 15.19%

Can anybody agree these??

Over and out

ava 10 · 05-01-2010 11:56am

Mark McDermott wrote: »

OMG GUYS, THIS SFMA ASSESSMENT IS LIKE SOOOO STRESSFULL!!!:eek::eek::eek:

I've spent my entire Christmas Holidays trying to work out the alternative WACC calculations for the 3 sources of finance so I hope they're correct;

Scenario 1: 14.28%
Scenario 2: 15.23%
Scenario 3: 15.19%

Can anybody agree these??

Over and out

can i ask how ur calculating redeem debentures???

MAX72 · 05-01-2010 11:59am

Mark McDermott wrote: »

OMG GUYS, THIS SFMA ASSESSMENT IS LIKE SOOOO STRESSFULL!!!:eek::eek::eek:

I've spent my entire Christmas Holidays trying to work out the alternative WACC calculations for the 3 sources of finance so I hope they're correct;

Scenario 1: 14.28%
Scenario 2: 15.23%
Scenario 3: 15.19%

Can anybody agree these??

Over and out

Got the exact same figures myself......

Vaioer · 05-01-2010 12:30pm

One point

- On Page 1 it states that the dividend has been paid to ordinary shareholders(€125M) but that the dividend has not been paid to preference shareholder yet.

Surely preference shareholders have to be paid first and therefore another €12m has to be factored in for the payment to them.

MAX72 · 05-01-2010 2:39pm

Vaioer wrote: »

One point

- On Page 1 it states that the dividend has been paid to ordinary shareholders(€125M) but that the dividend has not been paid to preference shareholder yet.

Surely preference shareholders have to be paid first and therefore another €12m has to be factored in for the payment to them.

I do not think that has any affect on the WACC. Shares are trading cum dividend so just back it out.

The divident payment has already been accrued for in the P&L

See finance cost 91 - 8% Irredeemable 40
13% Redeemable 39
6% Pref 12

Total 91

Anyone else an opinion on this............
So it has been accounted for in the P&L, just not paid over.......

mcloum22 · 05-01-2010 2:58pm

ava 10 wrote: »

got pretty much the same answer for wacc on debentures..just a bit confused tho with the year zero if its 2009 or 2010 and the market value of debentures nt sure if its 100 r has interest 2be subtracted etc..

Hi, Could someone please tell me how ye got the 100m??

TMB · 05-01-2010 3:30pm

My WACC for the three financing scenarios

S1. 14.27%
S2. 15.20%
S3. 15.16%

Anyone get close to these as i'm not sure. For S1 I said the loan is over a 21 year period, is that right?

05-01-2010 6:08pm

MAX72 wrote: »

I do not think that has any affect on the WACC. Shares are trading cum dividend so just back it out.

The divident payment has already been accrued for in the P&L

See finance cost 91 - 8% Irredeemable 40
13% Redeemable 39
6% Pref 12

Total 91

Anyone else an opinion on this............
So it has been accounted for in the P&L, just not paid over.......

I agree, all the interest expenses have been provided for in the pl and bs

Student_123 · 05-01-2010 7:07pm

I think everybody has the right answer to the relevant costing bar the skilled and unskilled labour!! It's either skilled is either 12 or 0, and unskilled is either 60 or 76, so if you could throw down what you tink and we can get a final answer for everyone ya???

barrystealover · 05-01-2010 7:59pm

Mark McDermott wrote: »

OMG GUYS, THIS SFMA ASSESSMENT IS LIKE SOOOO STRESSFULL!!!:eek::eek::eek:

I've spent my entire Christmas Holidays trying to work out the alternative WACC calculations for the 3 sources of finance so I hope they're correct;

Scenario 1: 14.28%
Scenario 2: 15.23%
Scenario 3: 15.19%

Can anybody agree these??

Over and out

mark

for scenario 1 i got 14.25% so ireckon our difference is just down to rounding.

for scenario 2 i got 15.13%.if possible could you publish ur calculations so we could compare?

scenario 3 i am very rusty on so any help would be greatly appreciated

Underpaid_ACA · 05-01-2010 8:09pm

Hi guys thanks for all the help on this forum

I believe that is likely that we could get a calculation question in the area of foreign currency translational risk. We have been told that the Asian currency is likely to weaken over the next three years.

I think that we could be presented with a report that has been commissioned from the USD economist which will show a specific FX rate change over three years. They then could then ask us a two part question
1) to show how the companies FX exposure could be hedged and
2) show how the hedge works.

This is similar to example on page 863 in Wards book.

I haven’t seen anyone discuss this yet, thought I would throw it in to the mix.
:cool:

Coldplayer · 05-01-2010 8:22pm

MAX72 wrote: »

Got the exact same figures myself......

Exactly the same too

snipejuice · 05-01-2010 8:28pm

Hi Can anyone please post their workings for the 3 scenarios?

Coldplayer · 06-01-2010 12:39am

mcloum22 wrote: »

Hi, Could someone please tell me how ye got the 100m??[/QUOTE/]

The 100m is just a notional amount,

you should use the following cash flows

yr1 290
yr1and2 -(.13*300)(.8)
yr2 (300)

Vaioer · 06-01-2010 9:41am

Underpaid_ACA wrote: »

Hi guys thanks for all the help on this forum

I believe that is likely that we could get a calculation question in the area of foreign currency translational risk. We have been told that the Asian currency is likely to weaken over the next three years.

Yeah, we had considered that there might be a question on this as well.

However the example you mention is one which hedges interest rate risk(which might also be a possible question, given that the bank is preferred to offer an interest only loan, which we aren't told if it will be floating or fixed).

Surely translational risk is related to the exchange rate risk from transferring the assets and liabilities in Yuan back into €? In that case you would need to agree a currency future, not a interest rate future?

MAX72 · 06-01-2010 10:19am

Underpaid_ACA wrote: »

Hi guys thanks for all the help on this forum

I believe that is likely that we could get a calculation question in the area of foreign currency translational risk. We have been told that the Asian currency is likely to weaken over the next three years.

I think that we could be presented with a report that has been commissioned from the USD economist which will show a specific FX rate change over three years. They then could then ask us a two part question
1) to show how the companies FX exposure could be hedged and
2) show how the hedge works.

This is similar to example on page 863 in Wards book.

I haven’t seen anyone discuss this yet, thought I would throw it in to the mix.
:cool:

My understanding was that the case study and information is as given. If what you are saying is true they could put in what they like on the day.

MAX72 · 06-01-2010 11:03am

Student_123 wrote: »

I think everybody has the right answer to the relevant costing bar the skilled and unskilled labour!! It's either skilled is either 12 or 0, and unskilled is either 60 or 76, so if you could throw down what you tink and we can get a final answer for everyone ya???

Skilled 0

Unskilled 76 (ie 60+12)

Thats only my opinion.............

I have an overall loss of €16k

mcloum22 · 06-01-2010 11:40am

For senario 1 I got WACC of 14.27%. Does anyone agree?

I am unsure if we should use 1-22 years or 1-21 years?

Running Bing · 06-01-2010 11:45am

So anything final on the cost of unskilled labour for lesbleu proposal?

Its either 60,000 or 76,000.

Im not sure which one I would say. On one hand 76,000 makes sense because your forgoing the contribution of 60k and paying the labour of 16k that could be used elsewhere.

But my question is is'nt the 16k included already in the contribution for the other contract?

CAP 2 SFMA ASSESSMENT 2010

Comments