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1. in part (b), shouldn’t cash operating cost of earning be 6.5 ? ( 0.75/0.12 ) ? it says that it will happen indefinitely and i do not understand why this amount is already taken into account in (c) cash flow based valuation
2. in part (b), why we do not deduct one million of one off redundancy payment ? shouldn’t this also affect the earning ????
3. for calculating earnings in part (b), shouldn’t it be 40m + 20m(30×2/3) + 30million = 90million ? 20million is merely a consideration paid to target company and 30million should still be added since it is the shares owned by the target company.
4. if high PE ratio company acquires low PE ratio company, share price will still remain high since share price of the acquirer company multiplied with the offer ( 5/3 or 3/5….depending on the offer) ???
5. i do not quite understand in part (c) (i) where they get 23.35
they got new PE ratio of 23.35 but i do not understand why they have used 7.28 for the basis….
I have told you before, that this forum exists to help people with any problems they have when watching the free lectures.
It seems that rather than watching the lectures, you are trying to learn simply by working through past exam questions. That is up to you, although I do not think this is the best way of learning. However, by then asking question after question asking for explanations of everything in the question, you are effectively expecting free private tuition.
We do not and cannot give private tuition, and I cannot continue answering questions like this.
Watch the lectures, and then ask about anything in the lectures that you are not clear about – that is fine 🙂
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