[fmexam1219]

Hello, it sounds like we got the same questions.

For the one asking about the interest cover, i used PBIT/Interest and gearing was given debt/(debt+equity)

With the rights issue it meant that the gearing got better as there was more equity compared to debt. The interest cover also improved as the PBIT increased by 30%.

For the debt issue I had the interest cover going down as interest increased greater than the increase to PBIT. And I had the gearing fall as the debt was up compared to debt + equity.

Is this correct?

Also for the second question, the present value of buying the machinery and the lease. I was completely stuck.

The lease was 200k a year x 4. What was I supposed to do with this figure?
Then for the buying I was able to do the tax deductible depreciation but there wasn’t a whole lot on there either.

Was I supposed to multiply these figures by a discount rate? I couldn’t see there being one given?

Cheers!

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