[apanda]

Ah, understand now! Thank you so much John!

[apanda]

Good evening John,

I was confused about the cash reduced to 0 while retain earning up to 5 $M in year 2016.

I thought if Gupte VC exercises the right, 10 $M repurchased by Flufftort will be funded by the current retain earning 2.6 + original cash holding 7.6.

It will leave 0.2 balance. (7.6+2.6-10)
(Obvious I got the wrong answer)

As your explanation, 2.4+2.6 =5 (current retain earning + next year retain earning) is for year 2016 retain earning on FP, how about the cash?

If we supposes 7.6 will be used up to fund the repurchase share.
They are still short of 2.4 $M for the repurchase.

Thanks in advance!

[apanda]

Thank you Sir!

[apanda]

Sorry. Also why we assume the debt investor only would like to go for 8% return as same as risk free rate? Why we don’t assume they go for the market return rate 18%? I understand 8% is the minimum they shall go after, but why they don’t aim for the market rate? The market rate is the benchmark on the market, isn’t it?

Sorry, I am just suddenly confused with the words. (I know this must be a silly question.)

However, could you please kindly advise? Thanks.

[Author]

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