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IP 1 assignment Q4

Discussion in 'Financial Planning Study Group' started by chelseaC, 18th Jan, 2010.

  1. chelseaC

    chelseaC Member

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    Hi,
    I am proceding to IP1 assignment. but i am blocked at Q 4.

    I am not sure if i should include property investment loan interest (280000*7.75%) repayment and $280000 loan repayment in the DCF calculation if i use the discount rate of 8.75%?

    Could someone give me suggestion?

    Tks lot
     
  2. study

    study Member

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    Hi.

    Do you mean for part b of that question? Part A, which talks about DCF, only needs an explanation.
     
  3. L'homme

    L'homme Active Member

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    NO, I didn't include borrowing cost of 7.75%, since in the quesion it clearly states the discount rate of 8.75% RECOGNIZES the borrowing rate so there's no need. Am I right?
     
  4. CJ. Wentworth

    CJ. Wentworth Well-Known Member

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    If that's what it states then yes you are right :)
     
  5. L'homme

    L'homme Active Member

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    thanks C.J.
     
  6. Jennylichen

    Jennylichen Member

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    Hi guys, I calculated the q4 b and got results as following:
    PV = 500423
    NPV=82423

    q4 c
    IRR=15.8%

    Is it right? I am just not confident about my answer and want to check with you guys.
    Many thanks!
     
    Last edited by a moderator: 11th Apr, 2010
  7. Ally

    Ally Member

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    i got the same

    PV = $500,422
    NPV = $82,422

    Irr = 15.8%

    So hopefully with 2 people that means we have it correct haha
     
  8. SteelMonkey

    SteelMonkey Member

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    And I got 500421.73 and 82421.73 and 15.8

    Will the assessor mark one of ours right and the other two wrong, even though its only different by a dollar or two ? I think the slight discrepencies may be in the treatment of decimals.
     
  9. Liz123

    Liz123 Active Member

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    SteelMonkey, if you round the amounts up you to get to the same solution.

    Can anyone tell me the formula used to come to this solution, I have tried, but can seem to come to the same answer!
     
  10. Ally

    Ally Member

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    I used

    PV= ncf/(1+I) + ncf/(1+I)^2 + (ncf+FV)/(1+I)^3

    I got my assignment marked competent so i assume what we got is right
     
  11. Liz123

    Liz123 Active Member

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    Ally,

    Thanks for your help!:)

    Will give it a try over the weekend! Hopefully I can get it right and move on!!

    Liz123
     
  12. enem

    enem Member

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    IP1 or Super - which is easier????????

    Hi, can anyone here who has completed Kaplan's DFS (FP) tell me which module is easier -- IP1 or Superannuation & RP. I have done Risk Management and want to the the easier one of the two next.

    Also does anyone know if it is easier through Kaplan or Pinnacle, or are they both equally challenging.

    Really appreciate any advice, thanks
     
  13. Liz123

    Liz123 Active Member

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    Hi Ally

    Thanks for your help with the formula for q4b. I have been working on q4C of the question to calculate the IRR. The answers most people seem to have is 15.8%.

    Did u also get this answer? I again am not sure of the formula to use. Have tried both manually and in Excel I can manipulate the formula to get this answer but Im not really understanding it. Can you help!! This is what Im doing in Excel.

    IRR = -144500 Net Purch. Price 418000 - 280,000 cashflow yr 0 -6500 (?)
    IRR = -15.81%
    33000.00 cashflow year 1
    33660.00 cashflow year 2
    34501.50 cashflow year 3

    Thanks
    Liz
     
  14. Ally

    Ally Member

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    Yes i also got 15.8%. If i remember correctly it said to round to one decimal place meaning your calculation is correct.

    I used excell too & then used the following to check my answer was correct

    418,000= 20,500/(1+r)+ 20,972.50/(1+r)^2 + 596,560.25/(1+r)^3

    I'm having trouble with adobe so i can't check the subject notes to refer you to a page.
     
  15. johnluo721

    johnluo721 Active Member

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    I can confirm your 15.8% is right answer.
     
  16. Liz123

    Liz123 Active Member

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    Thanks so much for your help! Really appreciate it!

    Im finding this subject so difficult compared with ELC and RM. At least Im sort of on the right track!!

    Thanks again,
    Liz
     
  17. Ally

    Ally Member

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    That's ok. I got my assignment back a few weeks ago & exam is in a week. Happy to help.

    I skipped RM and decided on investment planning. I'll be doing RM next & def leaving super til last.
     
  18. Liz123

    Liz123 Active Member

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    Hi Ally,

    Well let me know if you need any help with RM! It's not too hard though!

    Im also leaving Super and Retirement till last!! And hoping it won't be as hard as this!

    Goodluck in your exam!

    Liz
     
  19. Liz123

    Liz123 Active Member

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    Hi Ally,

    What did you recommend for Q5c on the WOW shares. Buy, hold or sell.
    Other posts have recommended they sell because they were over valued! I was thinking the opposite, I have no idea?? Have looked at the notes and dont know where to look. The calculation I got for WOW's fair price was 20.86.

    Thanks in advance
    Liz
     
  20. Ally

    Ally Member

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    I recommended a hold rating as the p/e ratio is higher than the industry standard.

    As long as you justify your answer i don't think you can be marked wrong