Solution to ipcc fm november 2014 paper

Page no : 3

shardendu pathak (sorry) (25 Points)
Replied 18 November 2014

And mam in ques 1(d) I think that method u used is net income method ........But i use EBIT(1-tax)/cost of equity .....is that correct

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shardendu pathak (sorry) (25 Points)
Replied 18 November 2014

And mam in Q1(d) I think u solve the Q by net income. Method .........But ques ask m&m approach.........is it

shakuntala chhangani (FCA Course co-ordinator WIRC coaching centre) (2525 Points)
Replied 19 November 2014

@ Shardendu, in net income approach, overall cost of capital reduces as the debt content isncreases, but u see in my solution overall cost of capital has remained the same. It is 1st preposition of MM approach. secondly in NI approach Ke and Kd remain the same. but in my solution, as debt content increases, Ke increases in such a propotion so as to offset the effect of use of debt, the cheaper source of funds.it is second preposition of MM approach. K0 remains the same whether it is a levered co. or unlevered co.

further, in MM approch there will be no taxes (basic assumption). that is why tax has been ignored.

1 Like

Naushad Ahmed (CA student) (22 Points)
Replied 19 November 2014

so madam was questn no 6a) mngmt of rcbls wrong ?????

shakuntala chhangani (FCA Course co-ordinator WIRC coaching centre) (2525 Points)
Replied 19 November 2014

its not wrong. it is incomplete

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Naushad Ahmed (CA student) (22 Points)
Replied 19 November 2014

@ madam ...So anybdy who had attemptd d qsn will get marks mark ?????

shardendu pathak (sorry) (25 Points)
Replied 19 November 2014

Ohk mam thanku so much.......And plz upload cost solution too asap..........

shakuntala chhangani (FCA Course co-ordinator WIRC coaching centre) (2525 Points)
Replied 19 November 2014

@ Naushad Ahmed.. It will be decided by ICAI. I am not the right person to comment on that.

Yash sharma (Assistant teacher) (38 Points)
Replied 21 November 2014

Ma'am will I get marks if I don't take opportunity cost of capital at all in question 6a?

archit goel (Student) (21 Points)
Replied 21 November 2014

Well.. in the ratio analysis question, its given that long term debt is nil... It means that the question is wrong and the students would be awarded full marks... Isnt it?

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shakuntala chhangani (FCA Course co-ordinator WIRC coaching centre) (2525 Points)
Replied 23 November 2014

@ archit goel ...No u need to attend the question and give reason for ur solution. then only u will get marks.

Apurva Parikh (CA aspirant) (30 Points)
Replied 24 November 2014

Thanks Mam, for solution.

Ram Karan Verma (Article) (56 Points)
Replied 24 November 2014

thanku so much mam for your solution of financial management paper.

but 1 query i want to ask u that in ques no-3(b) about long term debts.they said in ques that long term debt are nil but we are assuming (B/F)

Afzal Lokhandwala (Student) (31 Points)
Replied 24 November 2014

A similar question relating to MM Hypothesis was asked in Nov 09. It has been solved using EAT and not EBT. MM Hypothesis was later on revised for tax. Madam, your opinion is sought. Also waiting for costing solutions. Thank you