Paper P4（bpp)
* Role and responsibility towards stakeholders. Ethical issues continue to appear regularly as an optional discussion question, normally with practical financial issues from elsewhere in the syllabus. The discussion question is normally one of the easier optional questions.
* Advanced investment appraisal. The compulsory question often features an NPV question with an analysis of risk. Cost of capital calculations are regularly tested, make sure that you are comfortable adjusting betas for differences in gearing. Real options and adjusted present value are also popular themes, and are normally tested in section B of the exam.
* Acquisitions and mergers. Although this area was heavily examined in December, this exam normally contains a question involving valuations which the examiner sees as a crucial part of the syllabus.
* Corporate reconstruction. This is a topical area; a question could also ask you to evaluate a capital reconstruction e.g. a business that is considering offering its creditors shares in order to enable it to survive.
* Advanced risk management. We would expect to see a numerical risk management question featuring either interest rate or exchange rate hedging. Foreign currency derivatives are due to be tested numerically; the new examiner has indicated that questions may well ask you to compare the results of a hedge using a number of different hedging techniques.
• Cost of Capital, Degearing and Regearing Betas, Cost of Debt including Credit Risk Premiums.
• Investment Appraisal involving NPV and or APV. May also require MIRR.
• Foreign Exchange Hedging Methods.
• Black Scholes Option Pricing Model Computations.
• Dividend Capacity and FCF.
• ‘Q4 Written Question’ – Risks, Ethics, Governance and possibly a slant on the recent Banking Crisis.
P4 students should be aware that the paper would still be a Bob Ryan style as Shish Malade has 'reviewed' the paper set by his predecessor. Based on what we saw in the December 2009 exam it is likely that the requirements will be clear and state exactly what you have to do.
1 Big NPV involving calculation of WACC using CAPM (gearing and ungearing betas), possibly a foreign investment needing forecasting of exchange rates,
2 Financial appraisal of a business (from sets of accounts) and calculation of Z-score (in which case formula will be given)
Section B:
3 Foreign exchange risk – futures and options
4 Either interest rate risk (futures and options), or possibly Option Pricing (share options and delta hedge)
5 Written question – impossible to guess, but possibly – “Quantitative easing”. What is it? Why do it? Risk involved in doing it?
Kaplan says:
• Acquisitions and business valuation (especially free cash flow method)
• Net Present Value
• Black Scholes model, but not the Grabbe variant
• WACC
• Interest rate hedging
Paper P4
Role and responsibility towards stakeholders. Ethical issues continue to appear regularly as an optional discussion question, normally with practical financial issues from elsewhere in the syllabus. The discussion question is normally one of the easier optional questions. Advanced investment appraisal. The compulsory question often features an NPV question with an analysis of risk. Cost of capital calculations are regularly tested, make sure that you are comfortable adjusting betas for differences in gearing. Real options and adjusted present value are also popular themes, and are normally tested in section B of the exam. Acquisitions and mergers. Although this area was heavily examined in December, this exam normally contains a question involving valuations which the examiner sees as a crucial part of the syllabus. Corporate reconstruction. This is a topical area; a question could also ask you to evaluate a capital reconstruction e.g. a business that is considering offering its creditors shares in order to enable it to survive. Advanced risk management. We would expect to see a numerical risk management question featuring either interest rate or exchange rate hedging. Foreign currency derivatives are due to be tested numerically; the new examiner has indicated that questions may well ask you to compare the results of a hedge using a number of different hedging techniques.
* Role and responsibility towards stakeholders. Ethical issues continue to appear regularly as an optional discussion question, normally with practical financial issues from elsewhere in the syllabus. The discussion question is normally one of the easier optional questions.
* Advanced investment appraisal. The compulsory question often features an NPV question with an analysis of risk. Cost of capital calculations are regularly tested, make sure that you are comfortable adjusting betas for differences in gearing. Real options and adjusted present value are also popular themes, and are normally tested in section B of the exam.
* Acquisitions and mergers. Although this area was heavily examined in December, this exam normally contains a question involving valuations which the examiner sees as a crucial part of the syllabus.
* Corporate reconstruction. This is a topical area; a question could also ask you to evaluate a capital reconstruction e.g. a business that is considering offering its creditors shares in order to enable it to survive.
* Advanced risk management. We would expect to see a numerical risk management question featuring either interest rate or exchange rate hedging. Foreign currency derivatives are due to be tested numerically; the new examiner has indicated that questions may well ask you to compare the results of a hedge using a number of different hedging techniques.
• Cost of Capital, Degearing and Regearing Betas, Cost of Debt including Credit Risk Premiums.
• Investment Appraisal involving NPV and or APV. May also require MIRR.
• Foreign Exchange Hedging Methods.
• Black Scholes Option Pricing Model Computations.
• Dividend Capacity and FCF.
• ‘Q4 Written Question’ – Risks, Ethics, Governance and possibly a slant on the recent Banking Crisis.
P4 students should be aware that the paper would still be a Bob Ryan style as Shish Malade has 'reviewed' the paper set by his predecessor. Based on what we saw in the December 2009 exam it is likely that the requirements will be clear and state exactly what you have to do.
1 Big NPV involving calculation of WACC using CAPM (gearing and ungearing betas), possibly a foreign investment needing forecasting of exchange rates,
2 Financial appraisal of a business (from sets of accounts) and calculation of Z-score (in which case formula will be given)
Section B:
3 Foreign exchange risk – futures and options
4 Either interest rate risk (futures and options), or possibly Option Pricing (share options and delta hedge)
5 Written question – impossible to guess, but possibly – “Quantitative easing”. What is it? Why do it? Risk involved in doing it?
Kaplan says:
• Acquisitions and business valuation (especially free cash flow method)
• Net Present Value
• Black Scholes model, but not the Grabbe variant
• WACC
• Interest rate hedging
Paper P4
Role and responsibility towards stakeholders. Ethical issues continue to appear regularly as an optional discussion question, normally with practical financial issues from elsewhere in the syllabus. The discussion question is normally one of the easier optional questions. Advanced investment appraisal. The compulsory question often features an NPV question with an analysis of risk. Cost of capital calculations are regularly tested, make sure that you are comfortable adjusting betas for differences in gearing. Real options and adjusted present value are also popular themes, and are normally tested in section B of the exam. Acquisitions and mergers. Although this area was heavily examined in December, this exam normally contains a question involving valuations which the examiner sees as a crucial part of the syllabus. Corporate reconstruction. This is a topical area; a question could also ask you to evaluate a capital reconstruction e.g. a business that is considering offering its creditors shares in order to enable it to survive. Advanced risk management. We would expect to see a numerical risk management question featuring either interest rate or exchange rate hedging. Foreign currency derivatives are due to be tested numerically; the new examiner has indicated that questions may well ask you to compare the results of a hedge using a number of different hedging techniques.
