Sit three original questions in the structure ACCA's study guide describes, on a 3 hours 15 minutes clock, with the formulae sheet and tables beside the paper. Each figure you enter is checked against the key, and Mia reads each written part and says what it covers and what to add.
Our free paper
3 questions, 100 marks, 195 minutes
Section A
A 50-mark case study with a stated response format, ending in 10 professional skills marks
Section B
Two 25-mark questions, each ending in 5 professional skills marks
Feedback
Figures checked, written parts read by Mia, with no mark and no pass or fail
How to use a practice exam
Sit it in one go on the clock: 195 minutes for 100 marks is just under 2 minutes a mark, so about 98 minutes for Section A and 49 for each Section B question.
Attempt every part: the marks are spread across the parts, and the professional skills marks reward how you present and judge, not only the numbers.
Afterwards, read Mia's notes on each written part, then practise the topics where your figures did not match.
How it is checked
A figure is checked against the key, with the working and any formulae sheet entry it uses. A written part is read by Mia against the points a strong answer makes: she quotes the sentences that make them and names the next point to add, with no mark and no model answer.
Before the full paper
If you are not ready for a full timed paper, start with the free diagnostic: one short question on every topic in the course's own format, then the topic to fix first and a lesson on it.
Try 3 questions
Short questions in the course’s own format, not ACCA’s: the exam itself is all written.
Question 1 · Course practice question · Adjusted present value2 marks
Adjusted present value
Rydal Co is offered a four-year government loan of $20m at 2% a year to finance a project. Its normal pre-tax cost of borrowing is 6%. The rate of tax is 30%, and tax relief on interest is received in the same year as the interest is paid at the end of each year. The project's base case assumes all-equity finance.
Measured against that base case, the loan's financing effects are two amounts each year for four years: the interest saved by paying 2% rather than 6%, taken before tax with no tax adjustment, and the tax relief on the 2% interest actually paid. Borrowing and repaying the $20m itself is not a financing effect. Both amounts are discounted at the normal pre-tax cost of borrowing.
What is the present value of the financing effects of the subsidised loan, in $m to two decimal places? (2 marks)
$
Question 2 · Course practice question · Interest rate hedging2 marks
Interest rate hedging
Quantock Co expects to place $15m on deposit in three months' time and fears that interest rates will fall before then. Interest rate futures prices are quoted as 100 minus the annual interest rate.
How should Quantock Co hedge with interest rate futures? (2 marks)
Question 3 · Course practice question · Valuing a target2 marks
Valuing an acquisition
Lowther Co has earnings of $40m, 100 million shares and a P/E ratio of 15. Morven Co has earnings of $10m, 40 million shares and a P/E ratio of 10. Lowther Co offers three new shares for every five Morven Co shares.
The combination is expected to add $2m a year to earnings after tax. Lowther Co's adviser expects the market to value the combined company on a P/E ratio of 14.
What will the offer be worth for each Morven Co share after the acquisition, in $ to two decimal places? (2 marks)
Yes. Practice exam 1 here is free: three original written questions in the exam's structure, 100 marks on a 3 hours 15 minutes clock. It is unofficial practice, not an ACCA paper.
Does the practice exam give a mark?
No. Figures are checked against the key and Mia reads the written parts, but neither is an examiner's mark, so the paper gives no pass or fail.
How many marks do I need to pass AFM?
50 of the 100 marks.
Unofficial practice for the ACCA Advanced Financial Management (AFM) exam, not affiliated with ACCA. ACCA is a trademark of the Association of Chartered Certified Accountants, which does not endorse this course. Every question here is original. No VAT is charged.
Formulae and tables
The formulae sheet and tables, as the exam provides them. Use the factors as printed, to three decimal places. There is no normal distribution table: a question that needs N(d1) or N(d2) gives the values.
Modigliani and Miller Proposition 2 (with tax)
ke = kie + (1 − T)(kie − kd) × Vd ÷ Ve
Or rearranged: ke + (1 − T) × kd × (Vd ÷ Ve) = kie + (1 − T) × kie × (Vd ÷ Ve)