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sir in this question- part b) am getting retained earnings and cash figure both as $2.2m whereas the examiner has gotten $5m as both cash and RE. And I found out RE, as 2.6(last year’s PATD)+2.4(this year’s PATD)+(3-6.5)*80%(on an increased loan of $65m, we pay 10% interest; added back $3m as we no longer incur that-as patel loan of $5m converted to equity and 8.5% on $30m no longer relevant)=$2.2m.
My cash was balancing figure, which turned out again as $2.2m.
After doing so much i don’t understand where i went wrong?
The question says that the proposed investment will only affect results after 30 June 2016.
Therefore the retained earnings at 30 June 2016 will have increased by 2.4M to a total of 5.0M.
As far as the cash is concerned, it was 7.6M, they receive 35M from the issue of shares and 35M from increasing the loan. In addition there is 2.4M because the increase in cash is equal to the retained earnings. So far that gives a total of 80M.
The spend 56M increasing non-current assets, 24M increasing current assets, and save 5M increasing current liabilities – a total of 75M.The leaves a cash balance of 80 – 75 = 5M
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