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@genty said:
There was an Mcq where equity beta of one company was 1.2 the target company’s beta was also given so did you take 1.2 while calculating Ke??

Proxy company’s debt/debt+equity ratio was 0.25 so i assumed that debt is 25 and equity is 100 – 25 = 75.

you have to ungear the proxy company’s equity beta to get the asset beta so

2.0(75/75+25) = 1.5 (Tax is ignored on this question)

And regear it with the capital structure of the investing company (100% equity financed so no debt here) 1.5(100/100) = 1.5

and use CAPM to calculate the discount rate with equity beta of 1.5

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@ehsanshah said:
Credit discount will decrease Days to 30 for 75% customers.. and overall affect decrease in Receivable

Exactly what i did, assuming that 75% of customers taking up the discount will mean that 75% of customers will pay in 30 days.

2880 x 0.75 x 30/360

and the rest remained at 51 days.

2880 x 0.25 x 51/360

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@evilozfon said:
in npv calculation how did you guys inflate the S.P and costs by :-
1) 4.7% + 4.7% for second year
or
2) value x (1.047)^n

which did you use?

the 2nd one, you have to use (1.047)^n

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<a href=”https://opentuition.com/members/chris165/&#8221;
Q2 Benefits: Increased profit from extra sales £480k. Reduced bad debts 12k
Costs: Discount: 108k Admin: 35k: Finance: 32k
Net benefit $317k

Q5 WACC before 10.9%, after 10.3%.

pretty sure the finance cost is benefit right? since receivables have reduced and you saved finance cost from having cash from receivables.

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@misschile100 said:
It was positive but can’t remember the exact figures but I don’t think it started with 9

i got 1,122,000 as answer. the figures are kinda too perfect, guess something went wrong.

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@misschile100 said:
You have to convert it at the current spot rate and that was the amount you would have to pay for it then if you were leading

i multiplied it with the half year borrowing rate of usd 🙁

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@ehsanshah said:

Leading was cheap.. all three were around 30k with difference of 1000 something..

Theory was subjective of course..

how do you calculate leading? i wasn’t sure about it so i got forward cheapest

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@odean20 said:
Its 3k credit

got that as well, debit 3k to provision and credit 3k to p/l was it?

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