CAP 2 SFMA Case Study 2016

lightspeed

Apologies, I was just getting that figure from revision notes I have but out some figures for that total. The total figure of 290300 comes from the following

Road crew cost: 4 *8000= 32000
Band: 6*2750*3 months= 49500

Cast members
Rehearsals: 18 * 2000 = 36000

Performance: 18*200*48 shows = 172800

Total: 32000+49500+36000+172800= 290300

s15r330

lightspeed wrote: »

Apologies, I was just getting that figure from revision notes I have but out some figures for that total. The total figure of 290300 comes from the following

Road crew cost: 4 *8000= 32000
Band: 6*2750*3 months= 49500

Cast members
Rehearsals: 18 * 2000 = 36000

Performance: 18*200*48 shows = 172800

Total: 32000+49500+36000+172800= 290300

I wouldn't lump them in like that, cast members are a specific group with specific costs, as are road crew etc. Besides, some is fixed and some is variable so you definitely want them split for breakeven if it comes.

Cap22016

AtticusFinch86 wrote: »

Having read the case study a few times and done a few calculations, I'm fairly confident I'm on the right track bar a complete curveball being lashed at me.

I'm thinking the following will be asked...

WACC (relevant info given and we will need it for NPV anyway)
Project appraisal - do projects meet assessment criteria (for both projects - NPV for international project)
Risk Management (FX risk will almost certainly come up, and possibly general risk. We'll probably be asked to discuss risks and how to mitigate)
BreakEven Point and/or MoS
Lifecycle - what is the optimum lifecycle of the "international Production".

I'd say 3 of those are likely to come up.

Domestic Production
Fixed Costs €375,500.00
Variable Costs €222,720.00 or €4640 per show



Internation Production

Cast Member Costs Y1 €65,250.00
Producer Costs Y1 €180,000.00
Set Transport Y1 €800,000.00
Fixed Costs €400,000.00 *Set Production



I've attached some of my workings but the above is the jist of what I have done. The main calculations are in the last 3 tabs. Is anyone else getting these figures?

Hey I have most of the same figures as you, the only difference is the road crew figure.. i have €32,000 ( €8,000 x 4crew).

AtticusFinch86

lightspeed wrote: »

just looking through what you have for project appraisal tab.

I got notes from one of the revision days and some costs on it are different from what you have.

I think you have an error for cost of road crew at €96000 as I think it should be €32000.

its says in the case study "Each member of the road crew will be employed for the three months of the proposed tour at a contract rate of €8000 each for the duration of the tour"

Notice it is the duration of the tour and not for each month as you have calculated it at.

We are not paying out €8000 to each road crew member each month only €8000 for each tour. So if tour was 3, 6 12 months etc, we would still only be paying out €32000 in total (€8000 per tour * 4 road crew members).

Also I'm not sure where you got the figure for cast members at €208800.

Revision notes I have, have it as follows:

Rehearsal: 18*2000 = 36000
Performance: 18*200*48 = 1728000

Cast member Total cost: 290300

You're right, just read it again. Must have misread it the first time. I had assumed it was a monthly salary. THanks for that, you've saved me a mark or two. God knows I need them all!

Cap22016

Whats everyone thinking on the ways to manage the foreign risk ? Transaction/Economic risk? Which Hedging Techniques do ye reckon would be best ?

Lyra Fangs

AtticusFinch86 wrote: »

You're right, just read it again. Must have misread it the first time. I had assumed it was a monthly salary. THanks for that, you've saved me a mark or two. God knows I need them all!

Hey, I have the same calculations as you once you correct the road crew salary.

However, just to point a few things for the long term project:
- We haven't been told if cast/producers get paid during the break months so be wary of that
- The producers salary rises by 10% in the 2nd year - it says nothing about it continuing to rise after that.

rcoffey

Cap22016 wrote: »

Whats everyone thinking on the ways to manage the foreign risk ? Transaction/Economic risk? Which Hedging Techniques do ye reckon would be best ?

there is alot of info in the notes about managing fx risk, but it seems very little can be related to the scenario we have here as we wont be able to guarantee how much we will be needing to change as it is not a fixed contract, currency options would seem to be the best option, although we may just be asked to come up with some general methods.

In relation to general risk should we be looking at the risk posed by putting all our eggs in the one basket in relation to taking the one show on for both our short term national show and also for our international show, also about the risk posed to running the show in certain countries such as South Africa

tagan10

hi, by looking at the extract of the balance sheet, would you say that Strand is highly geared? also, fuel cost for the short term project-i get 8640eur as im assuming 48 trips in total i/o by vehicle

abyrne24

If you look on home page of chartered grind school, it gives the workings they've done out. Its called workings file.

Paul C

When we have to calculate the NPV for the international option, should we put the €400,000 for the Set Production cost in as a year 0 outflow or should it be included in year 1?

backtothebooks

Paul C wrote: »

When we have to calculate the NPV for the international option, should we put the €400,000 for the Set Production cost in as a year 0 outflow or should it be included in year 1?

If you put the €400,000 as a T0 cash outflow and then put the inflow for year 1 as a T1 cashflow, year 2 as a T2 cashflow etc.... you're calculating the NPV as at the start of the project - in T1.

If you put the €400,000 as a T1 cashflow and the first years inflow as a T2 cashflow etc... then you're calculating the NPV of a project that will start in 1 years time, today.

I'd put the €400,000 as a T0 cashflow (first example above) and then simply mention in my solution that the answer obtained is the NPV of the project at the start of the project - ie the NPV at the beginning of 2017.

Marry91

Hi,

For the LT project, it says 'Gross ticket sales income will be earned in the local currency of each country visited'.

Just a thought but do you reckon we will be asked to calculate the € value of each currency per year? Using FEC's, etc

If not, how would we deal with receiving the money in different foreign currencies?

Thanks.

Marry91

Also, I've created a Group for CAP 2 on Facebook. Just for brainstorming future areas like the Audit & Assurance IA or the exams. Can also be used next year for the FAE's (I realise it's a bit late for the IA's on Saturday). Feel free to join, and invite people you know currently doing them. It's called 'CAP 2 - 2015/16'.

Current Population = 1

Jsmac67

For calculating the wacc in the exam, we will need the market value of debt. Should we simply assume a nominal value of 100 per bond and go from there or what do people think

Mark_23

Yeah unless told otherwise.

As this is an open book exam, does that mean we've to bring annuity tables or would they be provided?

Lyra Fangs

Mark_23 wrote: »

Yeah unless told otherwise.

As this is an open book exam, does that mean we've to bring annuity tables or would they be provided?

I would assume you have to bring them, they are in the finance book anyway at the back!

Jsmac67

Lyra Fangs wrote: »

I would assume you have to bring them, they are in the finance book anyway at the back!

Can't see them being needed though can you?

Jsmac67

Mark_23 wrote: »

Yeah unless told otherwise.

As this is an open book exam, does that mean we've to bring annuity tables or would they be provided?

Bare in mind the debt is irredeemable so if discounting is required it'll be a perpetuity.

Humour Me

I have 'Bring Annuity Tables' written and underlined on the front of my notes from the SFMA workshop so I'm assuming we were told to bring them with us.

Lyra Fangs

Humour Me wrote: »

I have 'Bring Annuity Tables' written and underlined on the front of my notes from the SFMA workshop so I'm assuming we were told to bring them with us.

I don't think we'll be using them, the present value tables are the key ones but it's no harm bringing.

At least a 1/3 of the notes I'm bringing in are more just in case than anything.

Lyra Fangs

Jsmac67 wrote: »

For calculating the wacc in the exam, we will need the market value of debt. Should we simply assume a nominal value of 100 per bond and go from there or what do people think

If not stated then assume 100 euro so they have 10 mil euro worth of the bonds so 100,000 bonds in total.

Jsmac67

Lyra Fangs wrote: »

I don't think we'll be using them, the present value tables are the key ones but it's no harm bringing.

At least a 1/3 of the notes I'm bringing in are more just in case than anything.

Even PV tables will probably be of no use unless the wacc is a well rounded number. But yeah no harm bringing too much as you said

Lyra Fangs

Jsmac67 wrote: »

Even PV tables will probably be of no use unless the wacc is a well rounded number. But yeah no harm bringing too much as you said

Well we have to discount our cashflows with something so I assume it'll either be an even number or more likely we have to round up/down.

s15r330

That was pretty tight!

Jsmac67

s15r330 wrote: »

That was pretty tight!

Q2 took a while alright!

Lyra Fangs

Jsmac67 wrote: »

Q2 took a while alright!

Insanely tight for time.

My workings are so messy god only knows if the marker will be able to read it.

I got 14% (rounded) for the wacc and both projects exceeded the goals set. Anyone else?

s15r330

Lyra Fangs wrote: »

Insanely tight for time.

My workings are so messy god only knows if the marker will be able to read it.

I got 14% (rounded) for the wacc and both projects exceeded the goals set. Anyone else?

My friend got 14 also, but I rounded the individual calculations as well as the final % to give 13%

Humour Me

14% here as well with both projects exceeding the minimum return required. The 5 minute warning was a bit of a shock, I'm won't be getting any presentation marks!

AtticusFinch86

I thought the content of the assessment itself wasnt too bad. Nothing too tricky. I got 14% WACC rounded up and I think about 380k cash inflow for domestic production. Think I got an npv of about 3m for international one, maybe more. Found the time constraints to be a real killer. I was just finishing off Q1 and had a glance at the clock, was distraught when i read 11.50. Couldnt believe it. I got first 2 questions finished and a Stab at q3.


Found the FR even more difficult. You really get no time to think something through. You just have to know how to deal with it right away and bang on to the next issue.

Jsmac67

AtticusFinch86 wrote: »

I thought the content of the assessment itself wasnt too bad. Nothing too tricky. I got 14% WACC rounded up and I think about 380k cash inflow for domestic production. Think I got an npv of about 3m for international one, maybe more. Found the time constraints to be a real killer. I was just finishing off Q1 and had a glance at the clock, was distraught when i read 11.50. Couldnt believe it. I got first 2 questions finished and a Stab at q3.


Found the FR even more difficult. You really get no time to think something through. You just have to know how to deal with it right away and bang on to the next issue.

I was the same for FR. The suspense account Q wording through me completely and under the time pressure I just did it so backwards, even though looking back I knew the journals etc! Live and learn

Lyra Fangs

AtticusFinch86 wrote: »

I thought the content of the assessment itself wasnt too bad. Nothing too tricky. I got 14% WACC rounded up and I think about 380k cash inflow for domestic production. Think I got an npv of about 3m for international one, maybe more. Found the time constraints to be a real killer. I was just finishing off Q1 and had a glance at the clock, was distraught when i read 11.50. Couldnt believe it. I got first 2 questions finished and a Stab at q3.


Found the FR even more difficult. You really get no time to think something through. You just have to know how to deal with it right away and bang on to the next issue.

I got about the same for the domestic but i think i was waayy off the mark with the international, think I got something like 7million

Took a stab at question 3 as well, got about a page and half down but i have tiny writing so hope they realise that :P

Presentation marks = 0

FR i actually thought was better, got through all the questions and actually had time leftover to check over my answers. Not that they're right but still!

Lyra Fangs

Jsmac67 wrote: »

I was the same for FR. The suspense account Q wording through me completely and under the time pressure I just did it so backwards, even though looking back I knew the journals etc! Live and learn

I got caught by the last adjustment being 462 and 426, I just read both as 462 as i tend to mix up my numbers so didn't even notice something was amiss until something pointed it out afterwards.

Jsmac67

Lyra Fangs wrote: »

I got about the same for the domestic but i think i was waayy off the mark with the international, think I got something like 7million

Took a stab at question 3 as well, got about a page and half down but i have tiny writing so hope they realise that :P

Presentation marks = 0

FR i actually thought was better, got through all the questions and actually had time leftover to check over my answers. Not that they're right but still!

I got your 7 million figure too don't worry haha

Jsmac67

Lyra Fangs wrote: »

I got caught by the last adjustment being 462 and 426, I just read both as 462 as i think to mix up my numbers so didn't even notice something was amiss until something pointed it out afterwards.

For part A I just did what each adjustment shouldve been if done correctly. Didn't mention and suspense till part B......hopefully I get something

Lyra Fangs

Jsmac67 wrote: »

For part A I just did what each adjustment shouldve been if done correctly. Didn't mention and suspense till part B......hopefully I get something

You'll get something for that, once you showed the correcting journals i.e. clearly out the suspense journals. Like for the consolidation adjustment you would have cleared out their massive 580k suspense.

Jsmac67

Lyra Fangs wrote: »

You'll get something for that, once you showed the correcting journals i.e. clearly out the suspense journals. Like for the consolidation adjustment you would have cleared out their massive 580k suspense.

Yeah thought that! So you reckon for A its okay to just so the 'what should have happened' journals as if their was so suspense account. And then in B show the actual suspense account adjustments?

Lyra Fangs

Jsmac67 wrote: »

Yeah thought that! So you reckon for A its okay to just so the 'what should have happened' journals as if their was so suspense account. And then in B show the actual suspense account adjustments?

Well for full marks in A you'd prob need to reverse their mistake then show the correcting journals.

E.g. Adj 1
They debited t. rec for credit purchases
What they did (don't think you have to show this it's more to help you)
Dr t. rec 500
Dr purch 500
Cr suspense 1000

Correction:
Cr t. rec 500
Cr t. pay 500
Dr suspense 1000

Then in part b you would dr you're t account and reference adj 1

Jsmac67

Lyra Fangs wrote: »

Well for full marks in A you'd prob need to reverse their mistake then show the correcting journals.

E.g. Adj 1
The debit t. rec for credit purchases
What they did (don't think you have to show this it's more to help you)
Dr t. rec 500
Dr purch 500
Cr suspense 1000

Reverse:
Cr t. rec 500
Cr t. pay 500
Dr suspense 1000

Then in part b you would dr you're t account and reference adj 1

That makes sense. I would've just showed CR RECs 500 and Dr payables 500 then addressed the suspense in B.

Should get a few so!

Lyra Fangs

What did people do for the inventory adjustment in question 1?

Jsmac67

Lyra Fangs wrote: »

What did people do for the inventory adjustment in question 1?

Think it was just a record inventory at lower of cost and NRV. So a normal write down,but also the costs of I think 8k to convert them would be taken away from inventory and expensed in cost of sales as they relate to a cost of inventory?

So it'd be closing inventory less write down less costs of conversion?

Lyra Fangs

Jsmac67 wrote: »

Think it was just a record inventory at lower of cost and NRV. So a normal write down,but also the costs of I think 8k to convert them would be taken away from inventory and expensed in cost of sales as they relate to a cost of inventory?

So it'd be closing inventory less write down less costs of conversion?

Yeah I got confused with cost and included the costs of conversion

Jsmac67

Lyra Fangs wrote: »

Yeah I got confused with cost and included the costs of conversion

Wouldn't worry too much. I was told from others who've done the interim in prior years that you're marked against the others in the room. The easy parts will get you the most marks and the most difficult may only end up being wrong half of what was planned.

For the SOCIE were there any changes bar dividend and retained earnings from this year?

Lyra Fangs

Jsmac67 wrote: »

Wouldn't worry too much. I was told from others who've done the interim in prior years that you're marked against the others in the room. The easy parts will get you the most marks and the most difficult may only end up being wrong half of what was planned.

For the SOCIE were there any changes bar dividend and retained earnings from this year?

That's all i had anyway! My BS was still out by quite a bit though

odonovan4148

Hi guys,

I am sitting the SFMA case study in May and there is no workshops on as it is only for a few people that could not sit the January sitting! Does anyone know where I could get a good grind with notes for the preseen case study?

Thanks in advance ( Chartered grind school isn't doing any!)

dyanne

Hiya - did you happen to find any resources for this? I'm doing it too and am a bit lost..