Just back from the exam. I just want to talk about two special events today. First, the genius moment. They gave me the current book value, the current residual income, and the current dividend. They wanted the next year book value. It took me almost 3 minutes to figure out that they wanted me to figure out the profit first before I could answer the question. It was actually a pretty clever question. I think it waqs the most clever question of the day.
On the other hand was that quesiton on cash flow. There are about 1 million formulas in the level 2 cirriculum. It is impossible to memorize all of them, so sometimes I use short cuts. One of the shortcuts is to memorize about 6 different ways to compute FCFF and 1 way to convert FCFF to FCFE. That way I don't have to remember 6 different ways to compute FCFE. Anyway, there was one question where they wanted me to compute FCFE. Of course to compute FCFF you need interest and I spent a solid 10 minutes thinking the quesiton couldn't be answered without interest expense. Of course it could if you knew the formula directly for FCFE. I got it right but questions on the level 2 exam shouldn't take 10 minute just to figure out how to answer the quesiton. I'll write more about the exam in a couple of days.
No comments:
Post a Comment