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Hello Sir,
Could you pls giv a brief explanation on the concept of Sale & lease back?
just a brief or a tiny example: ?
Suppose you own a machine.
A way of raising money is to sell it to a leasing company (so receive cash) and then to lease it from the leasing company (so we can continue to use the machine).
So, you have received cash and then pay ‘rent’ each year, which is similar to having borrowed cash and then paying interest each year.
In Npv calculations,
if its current price terms we take inflation from yr 1 itself,
but what terminology they might use to indicate us the inflation is to be from Yr 2 onwards?
is it “inflation in Arrears”, ?
and 1 more :D,
More f9 = more questions !!so I have noticed whenever calculating the Shares in total for a co. in a given question, the examiner has at times used the share value on balance sheet / Nominal value of 1 share
and at other times share value on balance sheet / Current Mv. of share
for valuation of a company OR WACC purposes
so when to use which ??
For ex: specimen paper q2, he uses 50cents (nominal value) for Market Capitalization to value the company ..
With regard to inflation, they will never use the expression ‘inflation in arrears’.
As I explain in the free lecture, you will either be told that the flow is at current prices – in which case you inflate straight away.
Or you will be told the flow in the first year, in which case it only inflates from the second year onwards.We always uses the market value of shares for WACC – always without exception.
For valuation we are calculating a market value in whichever way you are asked to do it.
The relevance of the nominal value is only to determine how many shares there are (because the total on the SOFP will always be at nominal value).
yup !
got it…
Thanks a lot….
This F9, so far has been the most interesting in all F-level papers !!
will definitely sit for P4 !!! (believe there is a lot more to this, lot more scope in this area of study) !! 😀
regards,
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