AFM has 20 professional skills marks: 10 in the Section A case study and 5 in each Section B question. ACCA names four skills: Communication, Analysis and Evaluation, Scepticism and Commercial Acumen.
Section A
10 marks, all four skills examined
Section B
5 marks in each question, at least two of Analysis and Evaluation, Scepticism and Commercial Acumen
In all
20 of 100 marks
The four skills
Communication: informing clearly and objectively in a suitable format, persuading with logical argument, and making complex issues simple for the reader.
Analysis and Evaluation: using appropriate techniques on the information given, weighing the findings and balancing costs, risks and benefits before recommending.
Scepticism: looking past what is immediately apparent, questioning assertions and assumptions, and challenging information where it is justified.
Commercial Acumen: showing awareness of the organisational and external factors in play, and recommending commercially viable solutions.
Format matters in Section A
The Section A case asks for a response in a specific format, such as a report to the board of directors. Communication marks reward meeting that format and writing for that reader.
How the course practises them
Every Section A and Section B style question here ends with a part on the professional skills criteria the question states. Mia reads that part like any written part: she shows which criteria your answer meets, in your own words, and what to add.
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 · ESG and ethics2 marks
ESG, stakeholders and ethics
Lowther Co's published ESG policy requires every project to be appraised with an internal carbon charge on its emissions. A new plant has an NPV of $4.90m at 8% before the charge. It will emit 12,000 tonnes of carbon dioxide a year for six years. The charge is $70 a tonne in year 1 and rises by $10 a tonne each year after that. Treat each year's charge as a cash flow at the end of the year, discounted at 8%, and ignore tax.
What is the plant's NPV after the carbon charge, in $m to two decimal places? Give a negative NPV as a negative figure. (2 marks)
$
Question 2 · Course practice question · Reconstruction and re-organisation2 marks
Reconstruction and re-organisation
Settle Co has been offered $124m in cash for one of its divisions. The tax base of the division's assets is $74m, and tax of 20% is payable on the gain on sale at once.
If kept, the division's free cash flow is expected to be $9.3m next year, growing at 2% a year in perpetuity, and the division's cost of capital is 10%.
By how much does the value of keeping the division exceed the cash Settle Co would keep after selling it, in $m to two decimal places? (2 marks)
$
Question 3 · Course practice question · Treasury and derivatives2 marks
Treasury and derivatives markets
Morven Co will borrow $15m for eight months, starting in two months' time, and sells three-month interest rate futures to hedge it. Each contract is on $500,000, priced at 100 minus the annual rate, with one tick of 0.01% a year. The number of contracts reflects the length of the loan.
By the time the loan starts, the futures price has fallen by 35 ticks.
What is Morven Co's gain on the futures, in $ to the nearest $? (2 marks)
20: 10 in Section A and 5 in each of the two Section B questions, according to ACCA's study guide.
Which professional skills does AFM examine?
Communication, Analysis and Evaluation, Scepticism and Commercial Acumen. All four are examined in Section A; each Section B question examines at least two of the last three.
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)